By Zainab Iwayemi
- Insurance covers 45% of the global economic losses in 2020
- Climate change to worsen secondary peril event
Natural catastrophes and man-made disasters are estimated to have cost the world $83 billion in 2020, a new report by Swiss Re, one the world’s leading provider of reinsurance and insurance, has disclosed. The figure makes this year the fifth costliest year since 1970, the report further stated.
According to the report, the losses were not unconnected to a connective storm such as thunderstorms with tornadoes, floods, hail and wild fire in the United States, coupled with secondary peril events around the world accounting for 70 per cent of the $76 billion insured losses from natural catastrophes.
Similarly, an additional claim of $20 billion of insurance claims was traced to a very active North Atlantic hurricane season, compared to the record seasons of 2005 and 2017. This dragged the insurance cover to 45 per cent of the global economic losses in 2020, which is above the ten-year-average of 37 per cent, the report stated.
Swiss Re noted that it is expected that Climate change would worsen secondary peril events as more humid air and rising temperatures create more extreme weather conditions favouring events such as wildfires, storms surges and floods.
Jerome Jean Haegeli, Swiss Re’s group chief economist said: “As with COVID-19, climate change will be a huge test of global resilience. Neither pandemics nor climate change is ‘black swan’ events. But while COVID-19 has an expiry date, climate change does not, and failure to ‘green’ the global economic recovery now will increase costs for society in future.”
He added: “This year’s natural disasters impacted regions with more insurance cover in place, providing vital support to the people and communities affected and enhancing their financial resilience.”
The United State suffered severe connective storms as a result of devastation for the whole year which may lead to a record of annual losses in the country for this peril. Similarly, the year 2020 saw Australia and Canada suffer significant losses from hail damage.
Meanwhile, in January Australia suffered hailstorms in south-eastern, which caused insured losses of over $1 billion while Canada experienced its costliest-ever hail event in Calgary in June, leading to losses of $1 billion.
The report also observed that in addition, fire contributed to secondary peril losses for insurers as high insured losses was chiefly caused by wildfires in the US from mid-August, the longest and most destructive ever recorded, as it continued in early 2020; while Oregon and Washington State, as wells as California in the United States had more than 800 wildfires burning close to six million acres, destroying thousands of structures and triggering billions in insured claims. Though, for fires, less than the record losses of 2017 and 2018, 2020 will be one of the costliest. Additionally, secondary perils included severe floods in several provinces along the Yangtze River in China from May, causing industry insured losses of roughly $2 billion.
In total, there were 30 named storms during the 2020 North Atlantic hurricane season. This included five named storms that made landfall in the state of Louisiana alone. Though, in 2020, most US landfalls did not hit densely populated areas, which resulted in relatively low insured losses of $20 billion, lower than the previous record hurricane seasons of 2017 and 2005
Martin Bertogg, head, Cat Perils, at Swiss Re said: “Large-scale climate conditions in the North Atlantic suggest elevated hurricane activity for 2021 and likely beyond. This increases the probability of a catastrophic landfall. Combined with the loss impact of secondary perils accelerated by climate change, insured catastrophe losses will only rise in the future,”
In February, there was more than $2 billion combined insured losses as winter storms hit northern Europe causing flooding, power outages and transport disruption. While in May, India experienced the most destructive tropical cyclone, Amphan in the Bay of Bengal, which caused economic losses of $13 billion. However, insured losses are expected to be just a fraction of the economic losses due to the region’s low insurance penetration.
Meanwhile, the catastrophe loss estimates are mainly for property damage as it excludes claims related to COVID-19. In addition, loss estimates in media release may be subject to change because not all loss-generating events have been fully assessed – COVID-19 has elongated the claims lifecycle, particularly for large events, and it will take considerably longer than normal to assess the final tally.