The damage bill calculated by AIR annually has risen every year since 2012, with 2017 on par with record losses experienced in 2011 the firm said in its Global Modelled Catastrophe losses report.
“2017 offers a powerful reminder that the insurance industry and other stakeholders must never be complacent,” the report notes. “After a decade of below-average losses (apart from the aforementioned 2011), 2017 will surely remind not just newcomers to the industry, but even those who have spent their careers assessing and managing catastrophe risk, that preparing for large losses before they occur is critical to continued solvency and resilience.”
For businesses with an international footprint, AIR said it is vital to appreciate the impact of global disasters.
“Understanding—and owning—this risk requires knowing both the likelihood of high-loss years and the diversity of events that could produce such losses,” the report continues. “In addition, companies with global exposures and an expanding global reach should prepare for the possibility that future catastrophes will produce losses exceeding any historical amounts.”
In addition, AIR stressed that underinsurance remains a problem both in under-developed and developed nations.
Only 19% of the world’s total economic losses were estimated to be insured in 2017 with just 9% of Asia’s economic losses insured, 14% of Latin America’s, 37% of Oceania’s and 38% of North America’s.
“Through the years, Asia has remained the region with the largest proportion of uninsured risk due to relatively low insurance penetration and, in some cases, nascent insurance markets,” the report continues. “However, a substantial insurance gap exists in the United States as well, especially in the areas of flood and earthquake.”
While the protection gap is worrying for both the insurance industry and the wider community, the report notes that it can help spur product innovation within the industry while the public sector and governments are beginning to realise the importance of a proactive approach to disasters.
“Understanding the protection gap can help governments assess the risks to their citizens and critical infrastructure, and develop risk-informed emergency management, hazard mitigation, and public risk financing strategies to enhance global resilience and reduce the ultimate costs,” the report concluded.
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