Aon: Damage from Natural Disasters Reach $268B in 2020, Climate Change Driving Increases
Global professional services firm Aon announced the launch of its global Weather, Climate & Catastrophe Insight: 2020 Annual Report, evaluating the impact of global natural disaster events. According to the new report, there were 416 natural catastrophe events in 2020, resulting in economic losses of $268 billion. The company noted that this represents increased losses of 8%, compared to the century average, citing causes including climate change, more people moving into hazard-prone areas and an increase in global wealth.
Greg Case, CEO of Aon, said:
“The global response to the socioeconomic volatility caused by the COVID-19 pandemic has increased focus on other systemic risks – particularly climate change – and is causing a fundamental reordering of business priorities. This report highlights the increasing likelihood of ‘connected extremes’ and reinforces that leading organizations of the future will be defined by their ability to manage the global implications of concurrent catastrophic events. In a highly volatile world, risk remains ever present, is more connected and, as a result, is also more severe – and 2020 has underscored this reality. It has also emphasized the need for enhanced collaboration between the public and private sectors, which will be essential to close the rising protection gap and build resilience against natural catastrophes.”
The growing economic impact of natural catastrophes increasingly affects governments and insurers, and especially those without insurance protection. According to Aon, of the $268 billion damage in 2020, private sector and government-sponsored insurance programs covered $97 billion, with the remaining 64% of losses not covered by insurance.
Assessing and forecasting the impact of climate change on insurers has become a major focus for the industry. Last week, the UN Environment Programme’s Principles for Sustainable Insurance Initiative (PSI), a group of 22 of the world’s leading insurers and reinsurers, announced the release of a report examining the assessment of impacts of climate risks on the insurance business.
Steve Bowen, Director and Meteorologist for Aon’s Impact Forecasting team, said:
“The world continues to evolve as it is faced with new challenges around natural perils. While many private and public sector entities primarily focus on physical and human hazard risks, an increasing number of global regulative bodies are further pivoting towards how to handle emerging transitional and subsequent reputational risks. This is especially true as the financial and humanitarian risks surrounding climate-enhanced events become more evident on a daily basis. Focus at the corporate and federal levels will be critical around investments in risk mitigation, resilience, and sustainability as the landscape around climate change solutions continues to accelerate with renewed urgency.”
According to the report, tropical cyclones were the most costly category of catastrophes, causing more than $78 billion in direct economic damage, followed by flooding at $76 billion. More than 8,000 people lost their lives due to natural catastrophes during 2020.