Re/insurance broker Aon has estimated that the re/insurance industry will incur $90 billion of catastrophe losses in 2018, or around 40% of the total $225 billion economic cost.
Aon reported that losses were generated by 394 natural disaster events in 2018, with weather catastrophes driving the majority of losses.
The broker also claimed that the proportion of losses incurred by private sector and government-sponsored re/insurance programs was the fourth highest year on record, while the protection gap was at its lowest level since 2005.
Aon’s estimates are significantly higher than recent figures from Swiss Re, who said last month that natural catastrophes and man-made disasters would result in $155 billion of global economic losses in 2018, with re/insurers covering around $79 billion ($71 billion excluding man-made disasters).
Aon noted that the largest drivers of losses in 2018 were tropical cyclones and landfalling storms, which caused a combined $72 billion in economic costs.
Hurricanes Michael and Florence in the U.S, Typhoons Jebi and Trami in Japan, and Typhoon Mangkhut in the Philippines, Hong Kong and China alone cost re/insurers nearly $28 billion, according to the report.
However, the single largest insured loss was the Camp Fire in Northern California, which is expected to cause $12 billion industry losses, out of a total $18 billion of insured wildfire losses.
Aon said that 2017 and 2018 were the costliest back-to-back years on record for both economic losses ($653 billion) solely due to weather-related events, and for insured losses across all perils ($237 billion).
“2018 was another active year for global natural disasters,” said Andy Marcell, Chief Executive Officer (CEO) of Aon’s Reinsurance Solutions business. “While there was not a singular “mega” catastrophe event, there were 42 billion-dollar events which aggregated to a slightly above-average year.”
“The re/insurance industry continues to withstand the payouts backed up with USD595 billion of capital but focus on managing the cost of changing climate and weather events by helping to close the protection gap,” he continued.
Steve Bowen, Director and Meteorologist at Aon’s Impact Forecasting team, also commented: “Among the takeaways from the events of 2018 was the recognition that catastrophe risk continues to evolve. The complex combination of socioeconomics, shifts in population and exposure into vulnerable locations, plus a changing climate contributing to more volatile weather patterns, is forcing new conversations to sufficiently handle the need for mitigation and resilience measures.”
“Natural disasters are always going to occur,” Bowen added. “How well we prepare can and will play a key role in future event losses.”
Other significant catastrophe loss events over the year included torrential rainfall in Japan during the month of July, which caused $10 billion in damages due to flooding, as well as the multi-billion-dollar flooding in India’s state of Kerala over the summer monsoon months.
Additionally, drought conditions caused $9 billion of mostly agricultural losses in Northern and Central Europe over summer, while parts of the U.S, Argentina, China and India also experienced drought events.
Europe was also impacted by Windstorm Friederike, which caused $2.1 billion of insured losses, according to Aon, while severe weather and flooding in Italy and Austria during October and November caused economic losses of $5 billion.