Nat cats cause $65bn economic loss across Asia Pacific in 2023, says Aon

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Natural catastrophes caused US $65 billion economic losses in the Asia Pacific region in 2023, according to global professional services firm, Aon.

In their recently published 2024 Climate and Catastrophe Report, Aon highlighted how there were 398 natural disaster events that took place globally in 2023, ultimately resulting in a $380 billion (2022 $355 billion) economic loss during the 12-month period under review – 22% above the 21st-century average – driven by significant earthquakes and relentless severe convective storms (SCS) across both the US and Europe.

The report shows that economic losses in the Asia Pacific region, specifically driven primarily by floods in China and drought in India, reached $65 billion, which is 48% lower than the 21st-century average.

A key figure to highlight, is that the ‘protection gap’ – the proportion of total losses that were uninsured – for Asia Pacific stood at 91%, with only 9% of losses, or $6 billion of economic losses covered by insurance.

Aon explained that this is below the 21st-century average of $15 billion, which clearly highlights the urgency to expand insurance protection within the region.

Meanwhile, flooding also remains a recurring threat in Asia Pacific with annual losses having exceeded $30 billion every year since 2010.

From what we understand, flood losses overall proved to be the costliest peril for the fourth consecutive year, accounting for more than 64% of the loss total in 2023.

At the same time, around 50% of the Asia Pacific losses were related to flooding in China, which resulted in more than $32 billion economic losses and $1.4 billion of insured losses.

It is important to note that many places witnessed significant flooding and record rainfall events in 2023, including the likes of Hong Kong, South Korea, India, and Pakistan.

The South Asia floods (Pakistan and India) resulted in nearly 2,900 fatalities. Much of the impact stemmed from regions where insurance penetration happens to be very low.

Additionally, the report noted that with economic losses nearly reaching $13 billion and insured losses of $1.4 billion, tropical cyclone losses for Asia and Oceania stood at 53% and 70% below their 21st-century averages.

However, the number of fatalities stemming from tropical cyclones stood relatively low for the second year in a row.

It is suggested that this might be a result of improved disaster response and adaptation measures.

Moving forward, the Asia Pacific region was also rocked by a number of large earthquakes across 2023.

Nearly 1,500 people were killed after a series of earthquakes struck Afghanistan’s Herat Province in October, and more than 200,000 homes were damaged in China’s Gansu Province in December.

Interestingly, extreme heat was another unexpected peril in the Asian region in 2023. Various parts of the region experienced prolonged periods of extreme temperatures in 2023, with China even enduring a new national heat record with the temperature soaring to 52.2°C in July.

A multi-week-long heatwave impacted many countries across South and Southeastern Asia in April and May. Additional losses in billions of dollars resulted from drought conditions that affected China and India particularly.

George Attard, CEO of Reinsurance Solutions for Aon’s Asia Pacific region, commented: “The findings from Aon’s 2023 Global Risk Management Survey for Asia Pacific demonstrate that although climate change is not featured in the top ten, it directly impacts four of the top ten risks for businesses, that is business interruption, rapidly changing market trends, supply/chain distribution failure and regulatory or legislative changes. With climate driving new extreme weather records, businesses increasingly need to quantify and address the direct and indirect impact of climate risk. Businesses must therefore leverage advanced analytics and experts to help analyse climate trends and make better decisions to address risks and increase the resiliency of their operations, workforces and the communities they impact.”

Brad Weir, head of analytics of Reinsurance Solutions in Asia for Aon, said: “The 2024 Climate and Catastrophe Insight report highlights the vulnerability of the region to disasters and how the lack of insurance exacerbates business risks. With climate variability we see natural hazards impacting areas that in recent times may have been largely unaffected, meaning those communities are generally under-prepared and may not have adequate insurance in place. Closing the protection gap will therefore continue to pose a challenge but also a huge opportunity for Asia Pacific. There is a growing need for advanced climate modelling and risk assessment analytics for better disaster preparedness and planning to reduce risk, protect lives and promote resilience.”

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