Natural disasters caused $130B insured losses in 2021, Aon

Global economic losses related to natural disaster events in 2021 were recorded as the seventh costliest year on record, according to the 2021 Weather, Climate and Catastrophe Insight report from Aon.

The total losses and physical damages were estimated to cost $343 billion, well below the peak loss year in 2011 of $615 billion, however, the 2021 losses, compared to 2011-2020 were about 4% higher than the average of $271 billion, according to the report. Insured losses were $130 billion, about 75% above the 21st-century average, and 71% of the global insured losses were recorded in the U.S.

The Aon report includes information related to natural disaster events, economic losses and highlights areas to build a longer-term plan for tackling global challenges related to climate change.

Hurricane Ida was one of the highest individual losses, $36 billion, recorded by private and public insurers. The hurricane season in the U.S. included eight hurricanes that made landfall, which is higher than average. The U.S. also experienced several other expensive weather events including severe storms, tornadoes, heatwaves, droughts and major fires in California and Colorado.

“The impact of climate change has numerous knock-on effects beyond the immediate damage to property and infrastructure,” the report states. “Issues such as the global supply chain, healthcare, transition risk within an evolving regulatory environment, emergency management and climate displacement are all affected by the problems associated with climate change. It is therefore critical that the public and private sectors work together to find a more equitable way to limit future risk.”

The report highlights several areas to create resilience moving forward including identifying loss trends, promoting risk mitigation efforts in public and private sectors and exploring traditional and other alternative insurance options for people and assets.

In Western and Central Europe flooding was a major loss event that cost about $13 billion in insured loss. Flooding was the costliest peril in 2021 at $105 billion in economic losses, followed by tropical cyclones, severe weather and winter weather. In the U.S. and Mexico, winter weather events cost $15 billion in insured losses.

The report suggests that building changes are necessary in evolving with the changing climate.

“To limit physical risk in both developed and emerging markets, a strategic investment is needed in identifying best practice and cost-efficient ways to improve how and where we build in the face of growing climate-related impacts,” the report states. “The insurance industry has already taken initial steps by investing in the testing of material building performance.”

Additionally, the report goes on to note that physical changes are not the only necessary move and that regulatory requirements that mandate certain climate-related disclosures are increasing and that trend will continue.