Climate-influenced weather is key driver of $268B global damage from 2020 natural disasters

“When Natural Disasters and a Pandemic Collide” global annual report explores “connected extremes”

Aon plc (NYSE: AON), a leading global professional services firm providing a broad range of risk, retirement and health solutions, today launches its global Weather, Climate & Catastrophe Insight: 2020 Annual Report. The report evaluates the impact of global natural disaster events to identify trends, manage volatility and enhance resilience. 

The report reveals that the 416 natural catastrophe events of 2020 resulted in economic losses of USD268 billion – 8% above the average annual losses for this century – as costs continue to rise due to a changing climate, more people moving into hazard-prone areas, and an increase in global wealth. Of this total, private sector and government-sponsored insurance programs covered USD97 billion, creating a protection gap of 64%, which is the portion of economic losses not covered by insurance. This highlights the importance of addressing the underserved by ensuring that there is increased access to affordable insurance products in the future.

“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.”

Greg Case, CEO of Aon

“This report highlights the increasing likelihood of ‘connected extremes’ and reinforces that leading organisations of the future will be defined by their ability to manage the global implications of concurrent catastrophic events,” said Case. “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.”

During the year, more than 8 000 people lost their lives due to natural catastrophes. Tropical cyclone was the costliest peril, causing more than USD78 billion in direct economic damage. It was closely followed by flooding (USD76 billion) and severe convective storm (USD63 billion). From a climate perspective, NOAA cited 2020 as the world’s second-warmest since 1880 for land and ocean temperatures at +0.98°C (+1.76°F) above the 20th-century average.

“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.”

Steve Bowen, Director and Meteorologist for Aon’s Impact Forecasting team

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. Significant regional events during 2020 included:

  • Costliest year on record for global severe convective storms led by historic U.S. derecho
  • U.S. mainland endured a record-breaking 12 named storm landfalls, including six hurricanes
  • Super Typhoon Goni struck the Philippines as the strongest landfalling storm ever recorded globally at 195 mph
  • Ciara became Europe’s costliest windstorm since Xynthia in 2010
  • Drought conditions reduced agricultural crop yields in Brazil and Argentina, burning 30% of the Pantanal Region
  • The most widespread Yangtze River Basin floods since 1998 caused USD35 billion of economic damage in China’s monsoon season

Exhibit 1: Top 10 Global Economic Loss Events1,2

Date(s)EventLocationDeathsEconomic Loss (USD billion)Insured Loss (USD billion)
June – SeptemberSeasonal FloodsChina28035.02.0
August 21 – 29Hurricane LauraU.S., Caribbean6818.210.0
May 15 – 21Cyclone AmphanSouth Asia13315.00.5
August 8 – 12SCS (incl. Midwest Derecho)United States412.68.3
July 3 – 15Kyushu FloodsJapan828.52.0
November 2 – 13Hurricane EtaCaribbean, U.S.3098.40.7
June – SeptemberSeasonal FloodsIndia1,9227.60.8
September 14 – 18Hurricane SallyUnited States07.03.5
March 22Zagreb EarthquakeCroatia26.10.1
July 30 – August 5Hurricane IsaiasU.S., Caribbean, Canada185.02.7
All other events146 billion67 billion
TOTAL268 billion97 billion

1 Subject to change as loss estimates are further developed

2 Includes losses sustained by private insurers and government-sponsored programs

The full report is available on Aon’s interactive microsite at https://aon.io/2XplYk4. To access current and historical natural catastrophe data, as well as event analysis, please visit catastropheinsight.aon.com.

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