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The increasing impact of natural disasters highlights the need for companies, industries, governments, and communities to collaborate and create the best path towards resilience
From intense tropical cyclone landfalls, record-breaking wildfires, severe drought, and widespread seasonal flooding - natural disaster events in 2018 led to
economic damage of $225 billion
After two of the costliest back-to-back years on record for weather disasters, Aon
experts evaluate the impact of 394 natural disasters in 2018 – and offer analysis on how to build resilience towards future shocks.
Which regions suffered the most damage?
Which locations are most vulnerable?
What insurance strategies can be considered
to close the protection gap?
How can we best prepare for resilience?
The report aims to help businesses, communities, governments and the
re/insurance industry to boost their resilience and address the long-term
implications to climate risk.
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Economic vs. insured cost of natural disasters in 2018
economic losSes
$225 billion
GLOBAL
Protection Gap
$135 Billion
insured loses
$90 billion
Steve Bowen, Meteorologist and Head of Catastrophe Insight at Aon discusses 2018 natural disaster events leading to economic damage of $225 billion. Insurers covered $90 billion of that cost - the fourth-highest annual total for the industry on record.
Which events led to $225 billion in economic costs last year?
Wildfires and Hurricanes:
The Growing Protection Gap
For the second year in a row, damage losses and human casualties caused by wildfires have risen sharply. Most of the losses were once again driven by catastrophic fire events in California. Given the back-to-back years of considerable losses for the industry, this peril is changing how insurance, government, and other sectors view the wildfire threat.
2018 was also another very active year for tropical cyclone activity with several notable landfalls around the globe. While not as financially expensive as 2017, storms combined to cause at least $72 billion in economic damage.
Record Global Insured
Losses for Wildfires
Globally, total insured losses for the peril were nearly
$19 billion – a new record. This was even higher than the $17 billion incurred in 2017. Overall economic losses were even higher at $24 billion.
Record Global Insured Losses for Wildfires
Wildfire Impacts in the U.S.
Tropical Cyclones & The Global Protection Gap
Hurricanes & U.S. Losses
Wildfire doesn’t have a single, lasting solution at any level. State and federal efforts can improve funding and execution
of ongoing forestry management and wildland vegetation strategies, along with additional training and capacity to fight
wildfires. These defenses are powerful, but require time, political courage and community will. Meanwhile, homeowners
should follow the age-old wisdom that the best offense is a great defense, and work to mitigate risk.
- The Insurance Institute for Business & Home Safety (IBHS)
With the continued expansion of exposure and population into known fire locations, there is an increased
risk of greater wildfire losses in the future. The high financial toll caused by the peril has allowed for more direct
conversation between the public and private sectors in how to handle wildfire mitigation.
- Dan Dick, Executive Managing Director, Reinsurance Solutions, Aon
Global and Regional Findings
The global total of economic losses resulting solely from weather disasters:
215
$
the tropical cyclone peril was the costliest of 2018 - the sixth-most expensive year for the
peril since 2000.
billion,
At $
weather and climate risk?
The three most significant fire events of 2018 each occurred in California. November’s Camp Fire was the year’s costliest industry event at $12 billion. As loss development occurs well into 2019, it is possible that the final total may be even higher.
Wildfire Impacts
in the U.S.
One of the biggest impacts of the tropical cyclone peril is the continued large protection gap. Since 1980, the percentage of covered tropical cyclone-related damage is 31 percent. This means that 69 percent – or $1.1 trillion – of global storm damage has gone uninsured. Hurricanes Michael and Florence caused economic losses of at least $32 billion in the U.S. alone in 2018 – only half of which were insured.
Tropical Cyclones & The Global Protection Gap
billion
72
42
The number of billion-dollar natural disaster events in 2018.
Natural disasters are
putting pressure on insurers to look to the future and manage evolving climate risk. At the same time, this is also an opportunity for the industry to encourage investors, lenders, insurers and policymakers to explore how they can best manage and respond to increased physical risks of climate change using insurance products and industry knowledge.
- Greg Lowe, Global Head of Resilience and Sustainability, Aon
Building Cross-Industry Solutions for Weather and Climate Resilience
Headline for
Reanalysis Project
As populations move and weather patterns shift due to climate change, the question of
resilience continues across all perils. From protecting against wildfires to the long-term
impacts of drought – stakeholders across the insurance industry, government agencies,
risk managers, emergency management, climate science, academia, and others – can
use these findings to better understand and impactful solutions to the growing risk.
As populations move and weather patterns shift due to climate change, the question of
resilience continues across all perils. From protecting against wildfires to the long-term
impacts of drought – stakeholders across the insurance industry, government agencies,
risk managers, emergency management, climate science, academia, and others – can
use these findings to better understand and impactful solutions to the growing risk.
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The overall economic total was an estimated
92
$
billion
The insurance industry’s most costly event of 2018 was California’s Camp Fire. The wildfire damaged or destroyed nearly 20,000 structures and became the most destructive and deadliest wildfire on record in California.
of which
57
$
billion
was covered by public and private insurers.
14
When compared to
annual data from 2000-2017, economic losses in 2018 were
higher than the average ($81 billion) and an even greater
100
percent
higher from the median ($46 billion).
percent
The costliest event was recorded in South America: An extended drought in Argentina led to an economic impact of at least
5.1
$
Canada recorded the lion’s share of insured losses in the region, primarily due to severe thunderstorms. One storm event in May led to
billion
Insurers in EMEA recorded aggregated losses of more than
10
$
Last year was marked by notable droughts, which brought the economic losses related to the peril above
billion
The overall insured loss
21
billion
Natural catastrophes remain a key risk for agriculture in Asia Pacific but the good news is that the insurance industry can help – if governments are prepared to increase their budgets and invest in more comprehensive insurance schemes.
in claims payouts.
475
$
million
- 18 percent above the long-term average since 2000.
mark for only the fourth time in history.
10
$
billion
- Michal Lorinc, Catastrophe Analyst, Reinsurance Solutions, Aon
Insurers in the EMEA region
faced an above-normal year largely due to losses from both winter and summer storms. However, the largest economic costs were caused by one of the worst droughts in a century, which affected Central and Northern Europe.
for APAC was nearly
91
percent
higher than the average insured loss for 2000-2017
($10.8 billion)
and about
320
percent
higher than the median loss
4.9
$
billion
Marked by intense tropical cyclone landfalls, record-breaking wildfires, severe drought, and widespread seasonal flooding, 2018 natural disaster events led to economic damage of $225 billion. Payouts from public and private insurance groups covered $90 billion of the economic cost. 2018 was the fourth-highest annual total for the industry on record.
Global
Economic and insured losses derived from natural catastrophes in the U.S. were
elevated for a second year in a row in 2018.
U.S.
Asia Pacific experienced 150* separate natural disaster events meeting an Aon-defined threshold in 2018. The region suffered economic losses of $89 billion in 2018 due to natural disasters.
APAC
Focusing solely on weather-related costs, EMEA saw significantly increased disaster losses compared to normal; approximately 18 percent above both the 10- and 18-year averages and 43 percent and 32 percent above medians of the same respective periods.
EMEA
Overall economic losses in the Americas (Non-U.S.) were 49 percent lower than the 2000-2017 average – skewed by catastrophic loss years in 2010 and 2017 – and 19 percent lower than the median. The $10 billion in the Americas was a substantial drop from the historic $144 billion registered in 2017.
AMERICAS (NON-U.S.)
- Christopher Coe, Head of Agriculture, Reinsurance Solutions (Asia), Aon
- Anwesha Bhattacharya, Hydro-meteorologist and Senior Analyst, Reinsurance Solutions, Aon
Following record-breaking losses in 2017, last year was much less active across Latin America and Canada. However, severe thunderstorms led to industry losses beyond $1 billion in Canada for only the third time since 2000.
The last two years were the costliest back-to-back years for weather disasters. The combined economic toll was $653 billion, with insurers covering roughly one-third of the cost.
Choose a region to see the findings:
$
*To be considered an event, it has to meet at least one of the Aon-defined thresholds below:
10+ fatalities
50+ injuries
2,000+ damaged structures or filed claims
$50+ million economic loss
$25+ million insured loss
•
•
•
•
•
The global protection gap is the difference between the total economic losses and what's covered by insurers
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Record Global Insured Losses for Wildfires
Wildfire Impacts in the U.S.
Tropical Cyclones & The Global Protection Gap
Hurricanes & U.S. Losses
Record Global Insured Losses for Wildfires
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Wildfire Impacts in the U.S.
Tropical Cyclones & The Global Protection Gap
Economic losses were significantly less in 2018 than the record $312 billion from the previous year that was primarily driven by hurricanes Harvey, Irma, and Maria. For public and private insurance entities, 2018 claims payouts were nearly $30 billion from the peril. This compares to the nearly $94 billion incurred in 2017.
Hurricanes
& U.S. Losses
Hurricanes & U.S. Losses
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