Global cost of extreme weather last year higher than previous estimates, making 2017-18 costliest two-year period on record
The global economic costs of extreme weather hit $215bn after the planet was battered by hundreds of cyclones, floods, and wildfires last year, insurance giant Aon has estimated, further fueling concerns over the impact of increasing weather volatility in a changing climate.
The figure is significantly higher than that estimated just last week by rival insurer Munich Re, which set the bill for extreme weather in 2018 at $160bn. The results mean 2017-18 was the costliest two-year period on record for extreme weather disasters at $653bn, according to Aon.
Moreover, when natural disasters such as earthquakes are added to the mix, the 2018 figure rises to $235bn after 394 individual natural catastrophe events, calculates Aon's 'Weather, Climate & Catastrophe Insight 2018' report, which was published today.
Of the total $225bn in economic losses from natural disasters last year, private sector and government sponsored insurance programmes covered $90bn, meaning the protection gap - losses not covered by insurance - reached 60 per cent, which is the lowest level since 2005, the report said.
Andy Marcell, CEO of Aon's reinsurance solutions business, said 2018 was "another active year for 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," he said. "The re/insurance industry continues to withstand the payouts backed up with $595bn of capital but focus on managing the cost of changing climate and weather events by helping to close the protection gap."
The biggest drivers of catastrophes in 2018 were tropical cyclones and landfalling storms, such as Hurricanes Michael and Florence in the US, Typhoons Jebi and Trami in Japan, and Typoon Mangkhut which hit the Philippines, Hong Kong, and China, each of which caused at least $4bn of damage, the report estimates.
Of all 2018 global insured losses to natural disasters, 64 per cent were incurred in the US, after a year marked by devastating wildfires across California, Aon said.
However, the report found the majority of the more than 10,000 worldwide deaths caused by natural disasters last year occurred in the Asia Pacific region, where seven out of 2018's 10 deadliest disasters took place.
The update follows the stark assessment from experts convened by the World Economic Forum, who last week highlighted extreme weather as the most pressing risk facing the planet in 2019, with climate change and environmental risks making up four of the five greatest threats to the global economy. Global business leaders are currently attending the WEF's main annual even in Davos, where climate change is key issue on the agenda.
Steve Bowen, director and meteorologist at Aon's impact forecasting team said the risk of catastrophe "continues to evolve".
"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," he said. "Natural disasters are always going to occur. How well we prepare can and will play a key role in future event losses."
The message from Davos and the world's largest insurance firms could not be clearer: climate impacts are escalating and the case for coherent and credible climate resilience strategies has never been clearer.
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