Climate change and insurance: no storm in a teacup

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Last year was a turbulent one from an extreme weather point of view, featuring floods, typhoons, hurricanes, cyclones and other climate-related disasters such as wildfires and droughts. Besides affecting the public and private sector, this has affected the global insurance and reinsurance industry.

Data by reinsurer Munich Re suggests the economic impact of damages caused by extreme weather last year amounted to $160 billion. Of this, $80 billion was insured, a figure significantly higher than the 30-year average of $41 billion. This makes 2018 the fourth-costliest year since 1980 for the insurance industry.

Steven Bowen, Head of Catastrophe Insight Impact Forecasting at insurer Aon, isn’t surprised. “We are seeing increases in losses from an economic damage point of view and in terms of impact to the insurance industry, both primary insurers and reinsurers,” he says.

This year doesn’t look promising, with floods, droughts, and cyclones dominating the news in the first few months. The latest extreme climate events that made headlines were the floods in Iowa and Nebraska in the US, which resulted in $1.3 billion worth of damages, and Cyclone Idai. Besides killing 750 people and rendering 1.8 million people destitute, the latter disaster destroyed 90% of Beira, Mozambique’s fourth largest city.

To read more about how climate change is likely to affect insurers and reinsurers this year, download the May issue of RISKAFRICA magazine now!

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