The 2023 Weather, Climate and Catastrophe Information report revealed that natural disasters caused $313 billion in economic losses globally in 2022, 4% above the 21st century average.
Half of the total global losses occurred in the United States. About 42% of the losses ($132 billion) were covered by insurance, making 2022 the fifth costliest year on record for the industry.
“Mitigation is important, whether it’s better building codes, getting out of harm’s way where possible or doing whatever it takes to maintain properties,” said Dan Dick (pictured left), executive managing director and global head of property analysis, reinsurance solutions at Aon. .
“We saw that in Hurricane Ian, where the newer structures and roofs built to Florida’s strictest code worked very, very well.”
For Dennis Chua (pictured right), Senior Vice President, Head of Canada & Caribbean Cat Management, Reinsurance Solutions at Aon, risk education will need all hands on deck.
“Educating means helping policyholders understand what the peril is and what they need to cover, both from a business and owner standpoint. Unfortunately, many don’t know what they are supposed to know,” Chua said.
“How do we work together as an industry to help control that? How can agents and brokers do a better job of explaining what a policy does and does not cover before binding it? That is one of the key conclusions of this report.”
What natural disasters caused the most losses in North America in 2022?
Hurricane Ian dominated Aon’s list of disasters that caused the most economic losses in 2022 with $95 billion, of which $52.5 billion was insured.
The storm was responsible for around 30% of economic losses and 40% of insured losses globally last year. It has also become the second costliest natural disaster ever recorded by insurers, surpassing 2005’s Hurricane Katrina.
Hurricane Fiona was the most intense post-tropical storm to hit Canada, causing $4 billion in economic losses, including $1.6 billion in insured losses.
Meanwhile, the May 21 derecho that struck densely populated areas, including major cities in Ontario and Quebec, became one of Canada’s costliest severe convective storm outbreaks on record. The event generated payouts of $900 million.
“Water hazards have caused some serious losses to Canadian industry: of the 10 costliest disasters in Canadian history, historically, 60-70% has involved some form of water, either liquefied or frozen,” Chua said.
“These events are piling up on the balance sheets of reinsurance companies.”
Closing the protection gap
The Aon report, which identifies global climate and natural disaster trends, also showed that the protection gap (58%) was the lowest on record in 2022.
But according to Dick, this is largely because the largest losses were due to disasters in the US and Europe, where insurance penetration is high.
“We didn’t see the insurance protection gap in 2022 that we have historically seen in recent years,” he said.
Strengthening resilience will be paramount to moving forward, the Aon report emphasized. The adoption of effective adaptation strategies and better disaster management and warning systems will better protect communities against new records of extreme weather.
Educating people about the dangers that climate change brings and getting adequate insurance coverage is also a key step, according to the two executives.
“We believe there is an opportunity to do more to close the flood insurance gap in the US Not all consumers see the value in buying flood insurance, especially if they are not in one of the designated risk areas. flood,” Dick said.
“Second, while the federal government insures most special flood hazard areas, it’s hard for private carriers to get good risk sharing. I it is a combination of these two factors that make it difficult to do business in the US.
“But there needs to be more education about insurance and the fact that flood risk is essentially everywhere. We need to bring out a product that is priced according to the risk.”
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