Advisen Front Page News
- Thursday, January 27, 2022
Global insured losses hit $130B in 2021: Aon
Advisen
Global insured losses hit $130B in 2021: Aon
71% of losses occurred in the U.S., driven by severe storms
By Erin Ayers, Advisen
Extreme weather events took a $343 billion economic toll in 2021, with just 38% of the total ($130 billion) insured, according to an Aon report.
While not a record-breaking year, 2021 was just the second year on record with four events exceeding $20 billion in economic losses: Hurricane Ida, European summer flooding, seasonal flooding in China and the February polar vortex that swept much of North America. The number of events dropped to 401 from 416 in 2020, but economic losses increased.
“The most notable takeaway from the economic costs of natural disasters in 2021 was the frequency of large-scale and highly impactful events,” commented Aon in its 2021 Weather, Climate and Catastrophe Insight report.
The United States accounted for 71% of total insured losses in what has now become the fourth-costliest year on record after adjusting for inflation. Only 2017, 2011, and 2005 produced higher insured losses. However, the two-year loss total for the U.S. reached $176 billion, largely due to severe convective storms and high rates of insurance protection. Aon reported a record 19 SCS events in 2020 and 14 in 2021. Only three such events occurred elsewhere in the world.
Aon highlighted the “protection gap” – the difference between economic losses and losses covered by insurance – as an area of opportunity for new solutions from the insurance industry, financial markets, and governments. The protection gap improved slightly in 2021, from 63% to 62%, despite the increase in losses year-over-year.
“Clearly there is both a protection and innovation gap when it comes to climate risk,” said Eric Andersen, president of Aon. “As catastrophic events increase in severity, the way that we assess and ultimately prepare for these risks cannot depend on solely historical data. We need to look to technology like artificial intelligence and predictive models that are constantly learning and evolving to map the volatility of a changing climate.”
Several signs pointed to the impact of the changing climate in 2021, according to the report. The term “wildfire season” is becoming outdated, with events occurring year-round, and late-season tornadoes have become more common, Aon noted. 2021 also marked the sixth-warmest year on record with land and sea temperatures over a degree higher than last century’s average.
"We can no longer build or plan to meet the climate of yesterday. With physical damage loss costs rising, this is also leading to lingering global disruptions to supply chains and various humanitarian and other asset-related services,” said Steve Bowen, meteorologist and head of catastrophe insight at Aon. “The path forward for organizations and governments must include sustainability and mitigation efforts to navigate and minimize risk as new forms of disaster-related volatility emerge."
