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The Actuary The magazine of the Institute & Faculty of Actuaries

Global natural disasters result in $54bn of insured losses

Natural disaster events worldwide were responsible for a combined economic loss of more than $200bn (£162n) in 2016, and $54bn of insured losses according to Aon Benfield.

Flooding the most damaging ©Shutterstock
Flooding the most damaging ©Shutterstock

Their 2016 Annual Global Climate and Catastrophe Report shows that last year was the seventh highest on record for economic losses, with flooding the most damaging peril, causing nearly one-third of the economic losses incurred.

Record-breaking temperatures are thought to have been a significant contributor to an increase in severe weather, which combined with earthquakes and flooding, were responsible for 70% of all economic losses in 2016.

Aon impact forecasting director and meteorologist, Steve Bowen, said: “After a decline in catastrophe losses during the previous four years, 2016 marked a bit of an uptick in natural peril costs to the global economy.

“When recognising that we have seen a nominal increase in both annual and individual weather disaster costs in recent decades, we recognise that factors such as climate change, more intense weather events, greater coastal exposures and population migration shifts are all contributors to the growing trend.”

There were at least 34 natural disasters which each caused more than $1bn in economic damage around the globe last year, although just 26% of losses were covered by insurance due to a higher percentage of damage occurring in areas with low insurance penetration.

Despite this, the public and private insurance industry losses were 7% above the 16-year average, and the highest combined total recorded since 2012.

The top 10 global economic loss events in 2016 were:

Source: Aon Benfield
Source: Aon Benfield

A series of earthquakes in Japan proved to be the most costly to the economy ($38bn) and for the insurance industry ($5.5bn), while despite at least 72% of catastrophe losses occurring outside the US, the country still accounted for 56% of insured losses globally.

“With these parameters in place, and forecasts continuing to signal greater risk and vulnerability, it is anticipated that weather-related catastrophe losses will further increase in the coming years,” Bowen continued.

“The data and analysis in this report will help businesses, communities, governments and the reinsurance industry to better prepare and help mitigate the growing risks of these disasters."