The BCI

The high cost of natural disasters

News   •   Jan 15, 2016 15:50 GMT

Not much more than a quarter of global economic losses caused by natural catastrophes during 2015 were covered by insurance according to a new report by Aon Benfield. During the year there were 300 separate global natural disasters, as defined by the report's authors, significantly more than the 15-year average of 269 events. These caused a combined global economic loss of US$123, yet only US$35 billion was covered by insurance.

Despite the higher than average number of incidents, losses were down overall with the global economic loss being 30% below the 15-year average of US$175 billion, and the total insured loss being 31% below the 15-year average of US$51 billion. The Annual Global Climate and Catastrophe Report highlighted that there were 14 multi-billion dollar economic loss events around the world, with the costliest being forest fires that burned out of control in Indonesia. At US$16.1 billion, The World Bank noted that the economic loss from the fires represented 1.9% of the country's GDP.

Stephen Mildenhall, Chairman of Aon Analytics, said: "In many regions, economic catastrophe losses are very material relative to national GDP and yet are insured at much lower levels than in the United States and Europe. Of our top five economic losses, four occurred outside the United States and yet none of these was a top 10 insured loss owing to low insurance penetration in the affected countries."

The study reveals that the three costliest perils – flood, severe thunderstorm, and wildfire – accounted for 59% of all economic losses during the 12 months under review.

Steve Bowen, Associate Director and Meteorologist at Impact Forecasting, said: "While a notable uptick in recorded natural disaster events did not directly translate to greater financial losses in 2015, the year was marked by 31 individual billion-dollar disasters, or 20% more than the long-term average. For just the fourth time since 1980, there were more than 30 such events in a year. Asia once again incurred the greatest overall economic losses, representing 50% of the world total and four of the five costliest events. Despite 32% of global economic losses occurring in the United States, it accounted for 60% of the insured loss and seven of the top 10 costliest insured events."