All natural disasters cost $353-billion, with insurance industry in position to handle high volume of claims payouts and explore future growth to build resilience in underinsured regions
Impact Forecasting, Aon Benfield’s catastrophe model development team, launched its Weather, Climate & Catastrophe Insight: 2017 Annual Report, which evaluates the impact of the natural disaster events that occurred worldwide during 2017.
The report reveals that there were 330 natural catastrophe events in 2017 that generated economic losses of $353-billion, of which 97% ($344-billion) was due to weather-related events, including Hurricanes Harvey, Irma and Maria in the US and Caribbean, plus Typhoon Hato in China and Cyclone Debbie in Australia. For historical context, 2017s natural catastrophe losses were 93% higher versus the 2000-2016 average.
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Insured losses to the private sector and government-sponsored programs were among the costliest ever incurred, reaching $134-billion in 2017, just behind the record $137-billion in 2011. This is 139% higher than last year’s $56-billion, primarily due to high insurance penetration in the US that suffered a very active Atlantic hurricane season, severe weather events (convective storms) and wildfires.
Closer to home, Pieter Visser, a Catastrophe Analyst at Aon South Africa says that combined catastrophe insured losses for South Africa in 2017 was the highest ever recorded, driven by the Knysna fires and flooding in Durban. “Insurance released more than R5billion towards affected parties, which is absolutely necessary to rejuvenate economic recovery and renewal in affected regions,” says Visser.
“Reinsurers do not regard South Africa as a low catastrophe risk region anymore, with the country having experienced a high frequency of large loss events in the last five years,” he adds. “This is now regarded as the new normal and has resulted in adjustments and steep price increases by reinsurers. Insurers are retaining more risk than ever before, which is driving a need for greater understanding of these risks. When combined with high global losses, insurers will need to review risk premiums associated with natural catastrophes,” Visser says.
Eric Andersen, CEO of Aon Benfield, comments: “While 2017 was an expensive year for the insurance industry, the reinsurance market had an estimated USD600 billion in available capital to withstand the high volume of payouts. Most critically, the US weather and wildfire events, in particular, have demonstrated the value of reinsurance, with claims being paid in an average of eight days to augment the recovery process.”
Additional key findings of the report include:
- 36% ($80-billion) of economic damage from Hurricanes Harvey, Irma and Maria was insured
- $31-billion events occurred globally, with 16 alone in the US
- Wildfires caused $14-billion of insurance losses in 2017, the highest on record for the peril
- 10 000 human fatalities were caused by natural disasters, with the deadliest event being a massive landslide event in Sierra Leone when more than 1 100 people lost their lives
- 2017 was the third warmest year on record since 1880 for combined land and ocean temperatures.
Steve Bowen, Impact Forecasting director and meteorologist, says, “The high cost of disasters in 2017 served as a reminder that we continue to face increasing levels of risk as more people and exposures are located in areas that are particularly vulnerable to major, naturally occurring events. As weather scenarios grow more volatile in their size and potential impact, it becomes more imperative than ever to identify ways to increase awareness, improve communication, and lower the insurance protection gap. We know natural disasters are going to occur. The question is how prepared are we going to be when the next one strikes.”
Other significant events during the year included:
- An October wildfire outbreak, the most destructive ever recorded in the US state of California, caused nearly $13-billion in economic damage
- Substantial summer flooding causing more than $12-billion in damage across China
- Southern Europe endured an extended drought during the summer and autumn months that caused $6.6 billion in damage across parts of Spain, Italy and Portugal
- Elsewhere in Europe, the costliest thunderstorm event of the year affected central sections of the continent, particularly Poland, and left a damage bill of nearly $800-million
- In Mexico, two powerful earthquakes in September led to nearly $6-billion in combined economic losses, including major damage across Mexico City on the 32nd anniversary of its historic 1985 tremor.