Global insured losses from natural disasters reach $ 107 billion year-to-date in 2021: Aon

Insurance and reinsurance broker Aon estimates that at the start of the fourth quarter of 2021, global insured losses from natural disasters and severe weather events are about 13% above the annual 10-year average, reaching about $ 107 billion.

Conversely, the number of recorded events remains below the average for 2021 to date (YTD), but the financial loss of these natural disasters and severe weather epidemics has been particularly costly, explained the broker.

The global figure of $ 107 billion of insured losses in the event of natural disasters includes impacts on private insurance and reinsurance markets, as well as on public insurance entities.

2021 is already well ahead of the annual average, with the $ 107 billion figure already 13% above the recent 10-year average ($ 95 billion) and 26% above the 10-year median ($ 86 billion) , according to Aon’s calculations.

Third-quarter events dramatically increased insured payments, after Hurricane Ida estimate is now considered to exceed $ 30 billion by Aon, while flooding in Europe is estimated at $ 12 billion in losses for industry.

This is in addition to the $ 15 billion estimate for winter weather in the United States and Storm Uri in February.

At the start of the fourth quarter of 2021, there have now been 15 individual insured claims in the event of a billion dollar natural disaster this year.

Nine out of 15 have occurred in the United States, the rest in Europe (3), APAC (2) and the Americas (1), Aon said.

Aon has so far focused on the three previously mentioned $ 10 billion loss events in 2021, wondering if “mega” disasters are on the rise?

Aon explains:

There are many factors that lead to a high cost natural disaster event: location, intensity, duration of the event (duration) and type of construction. All of these factors – and many more – are essential in analyzing why some disasters cost more than others. The continued influence of climate change on specific weather and climate events has only amplified the behavior and unusual nature that individual events continue to exhibit. This means that hurricanes are intensifying more quickly; extreme rain events cause more precipitation to fall; forest fires burn faster and faster; droughts are more pronounced and prolonged; and the polar vortex can affect latitudes unaccustomed to prolonged periods of cold.

What does it mean?

The risk of natural peril has increased over time due to the noted meteorological, climatic and human factors (more people and things moving to very vulnerable places). This corresponded directly to more costly events on an aggregate and individual basis.

Getting the broker to explain this, he believes that for the insurance industry the frequency of “mega events”, or $ 10 billion loss events on a nominal or inflation-adjusted basis, is increasing.

global-insured-claims-10b-plus

The graph above shows that the first event over $ 10 billion occurred in 1989 (Hurricane Hugo), with this magnitude of event occurring every few years since.

But since 2017, there have been ten natural disasters that have caused a loss of more than $ 10 billion in the insurance industry, of which three in 2021 and fifteen of the twenty-six events tracked have occurred since 2011, according to the data. of Aon.

In terms of smaller events, based on insured losses, there have been 24 that have cost more than $ 5 billion since 1989, but half of them have occurred since 2011, Aon says.

Aon is now expected to see “increased pressure from the re / insurance industry to handle the costlier trend” as risks from natural perils become more costly, for some of the reasons detailed in the quotes earlier in this article.

“Whether this translates into a more active movement towards parameter-based insurance products, or more forward-looking investment strategies around a carbon tax or green bonds, the traditional way of looking at risk risks natural is quickly forced to change, “says the broker.

Adding that, “As concerns about litigation or liability risks increase as natural perils become more intense, this will only reinforce the need to invest with a forward-thinking mindset, as behavior events and the types of impact that result from them seem to evolve with each passing day. “

The data underscore the need for risk-proportional pricing in reinsurance and for the industry to review both its recent history, as well as longer-term trends, and adopt forward-looking science views on climate and weather trends. .

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