AON: Global natural disasters yield $102B in insured losses in Q1-Q3
Global natural catastrophe insured losses exceeded $102 billion in the first three quarters of the year and are likely to surpass 2023 levels, according to a new report.
Notable global natural disaster events resulted in economic losses of at least $258 billion in the first to third quarters (Q1-Q3), down from $351 billion a year ago and lower than the 21st-century Q1-Q3 average of $276 billion, according to Aon, a professional services firm, reported in its “Q3 Global Catastrophe Recap.”
However, insured losses surpassed $102 billion during the first three quarters, versus $125 billion a year earlier and the 21st-century Q1-Q3 average of $79 billion.
Aon projects that economic losses from Hurricane Milton and additional events expected to take place during the rest of the calendar year will push annual insured losses above the 2023 level of $125 billion.
Third-quarter insured losses were driven by three costly Atlantic hurricanes, severe thunderstorms in the U.S. and Canada, and flooding in Central Europe. So far this year, the U.S. has endured 26 separate billion-dollar events.
In August, Puerto Rico and the U.S. Virgin Islands suffered an economic loss of $520 million as a result of Hurricane Ernesto, while in July Hurricane Beryl inflicted $3.6 billion of economic losses in the U.S., Canada and the Caribbean as well as 70 fatalities.
“We know that climate change is creating havoc worldwide, and Puerto Rico is no exception,” Alicia Colón, chief broking officer for Aon Puerto Rico, told News is my Business.
“This is a very important study because it helps companies manage their climate-related risk, adopt proactive strategies, and make better decisions on how to mitigate and transfer their risk,” she said.
Colón noted that although the insurance industry has played a crucial role in covering a large portion of economic losses stemming from natural disasters, there still is a wide gap between insured and uninsured sectors.
The report revealed a global insurance protection gap of 60%, down from 69% a year earlier and one of the lowest on record. Aon attributed the drop to higher contribution of insured losses in the U.S., where insurance penetration is relatively high compared to other countries.
“That means the [global insurance protection] gap decreased by $154.8 billion. So despite the events of the last quarter, the insurance protection gap shrunk,” Colón said, citing increasingly sophisticated clients who are more inclined to obtain insurance coverage.
In 2017, Hurricane Maria led to economic losses of $92 billion, according to Aon’s “Weather, Climate & Catastrophe Insight: 2018 Report.” Some estimates surpass $100 billion.
“There’s a lot of discrepancy on exactly how much economic loss Maria caused in Puerto Rico because not everyone files claims. But what we know for sure is that insured losses were between $10.4 billion to $10.7 billion, and there’s several million [dollars], about 2%, in claims that have yet to close, yet to be paid,” Colón said.
Regarding the current quarter, Hurricane Ernesto, which was still a tropical storm when it hit the island in October, brought with it significant flooding, causing an estimated economic loss of $52 million in Puerto Rico, $23.5 million of it in the agriculture sector, Colón said.
“With climate change, it’s difficult to determine what will happen in the future, but, for example, last year we launched a tool called the Climate Risk Monitor that helps companies visualize their exposure to climatic risks — not only today but also in the future. It gives them geographic projections under scenarios such as rain, drought, extreme heat and wildfires,” she said.
