A new report from Aon outlines that last year was another “active” one for global catastrophes, despite the lack of “mega” disaster events.
The report, entitled “Weather, Climate & Catastrophe Insight: 2018 Annual Report,” noted that 394 natural catastrophe events in 2018 generated economic losses of US$225 billion. Of that total, private sector and government-sponsored insurance programs covered US$90 billion, revealing a protection gap of about 60% – a record low since 2005.
Aon identified tropical cyclones as the biggest drivers of catastrophes last year. These storms included Hurricane Michael and Hurricane Florence (United States), Typhoon Jebi and Typhoon Trami (Japan), Typhoon Mangkhut (Philippines, Hong Kong, China), and Typhoon Rumbia (China). The effect of these storms is such that 2017 and 2018 resulted in the most expensive, back-to-back years on record for both economic losses due to weather-related events (US$653 billion) and for insured loses across all perils (US$237 billion).
“2018 was another active year for global natural disasters. While there was not a singular ‘mega’ catastrophe event, there were 42 billion-dollar events which aggregated to a slightly above-average year,” commented Aon Reinsurance Solutions CEO Andy Marcell.
Marcell added that reinsurers have managed to keep up with the catastrophe losses in 2018, but believes the industry wants to focus more on prevention and mitigation rather than simply paying whenever a disaster occurs.
“The re/insurance industry continues to withstand the payouts backed up with US$595 billion of capital but focus on managing the cost of changing climate and weather events by helping to close the protection gap,” he explained.
“Among the takeaways from the events of 2018 was the recognition that catastrophe risk continues to evolve,” commented Aon Impact Forecasting director and meteorologist Steve Bowen. “The complex combination of socioeconomics, shifts in population and exposure into vulnerable locations, plus a changing climate contributing to more volatile weather patterns, is forcing new conversations to sufficiently handle the need for mitigation and resilience measures. Natural disasters are always going to occur. How well we prepare can and will play a key role in future event losses.”
Aon also noted in its report that 2018’s costliest insured loss event was the so-called Camp Fire in California, which led to US$12 billion in losses. The infamous blaze is now considered the state’s deadliest and most destructive fire on record.