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Aon warning on climate change urges collaboration

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Climate change drives new extreme weather records

A special report from global professional services firm, Aon plc, warns: “There is no greater volatility we face – collectively – than the impacts of climate change.

“Mitigating and in some cases adapting to climate change is one of the biggest challenges we face.”

The report, Weather, Climate and Catastrophe Insight, estimated that natural disasters caused a $313 billion global economic loss during 2022 – $132 billion of which was covered by insurance. It made 2022 the fifth costliest year for insurers on record.

Half of those losses occurred in the United States and were driven by the devastating Hurricane Ian and multiple severe convective storm outbreaks.

Three global drought events were among the 10 costliest disasters, which underlines the growing significance of the peril on a global scale. These occurred in the United States, Europe and China, as detailed in the accompanying chart from The Royal Gazette, using Aon data.

New extreme weather records were broken, and many regions saw prolonged drought and scorching heatwaves, a reminder noted Aon’s report, that the impact of climate change on communities around the globe is tangible and behaviour of certain natural perils will continue to be affected.

“With a protection gap of 58 per cent,” the report said, “most disaster losses were uninsured. While this is one of the lowest protection gaps on record (only matched by a similar percentage from 2005), the remaining gap presents both a challenge for the global resilience, as well as an opportunity to facilitate further protection.”

With regard to potential ways of mitigating or adapting to climate change, the report cautiously offers: “There are abundant opportunities, but success is not guaranteed. This is why collaboration between public, private and societal forces is essential.

“Aon has been developing partnerships across the industry to advance climate solutions and close the protection gap. Our recent work with the International Federation of Red Cross and Red Crescent Societies to create the Disaster Response Emergency Fund, which provides emergency funding for communities in all kinds of disasters when needs exceed resources, illustrates this commitment.”

Aon president Eric Andersen is quoted from remarks at the DREF pledging conference: “Big problems need to be solved by collaboration and this has been exactly that – humanitarian, private and public sectors partnering to prove that solutions can be found together.”

The report said some $50-55 billion of the global insured loss total resulted from Hurricane Ian in the United States – the second-costliest natural catastrophe in history from an insurance perspective, surpassed only by Hurricane Katrina in 2005, which resulted in nearly $100 billion in insured losses on a price-inflated basis.

The report also highlights that approximately 31,300 people lost their lives due to global natural catastrophe events in 2022.

The total number of fatalities remains below average for now, 12 years in a row; however, more than 19,000 of the fatalities were heat-related deaths in Europe alone, primarily as a result of heatwaves.

While a majority of total losses in 2022 were left uninsured, the 58 per cent "protection gap" was one of the lowest on record, highlighting a positive shift in how businesses are navigating volatility through risk mitigation, and how insurers are providing further protection to underserved communities through access to capital.

Greg Case, CEO of Aon, said the data highlights a tremendous opportunity for the company to better serve clients.

He said: “By working together on scalable solutions, we will not only mitigate risk, but bring together public, private and societal forces to accelerate innovation, protect underserved communities and strengthen the economy."

While technological innovation has allowed for better insight as catastrophes unfold and faster and more thorough assessments of damages after an event, the Aon study examines resilience and the ability to overcome climate-related consequences – not only for physical risks, but in areas like the health of the workforce, reiterating the need to build multifaceted strategies that account for climate change risk mitigation on all fronts.

Further findings of the report include:

•421 notable natural disaster events for the year

•75 per cent of global insured losses were in the US

•Eunice was the costliest individual European windstorm since 2010

•Widespread hailstorms in France contributed to the 2nd highest natural disaster payouts for the country

•Droughts and heatwaves severely impacted Europe, the US, China and other regions and global insurance payouts for the drought peril were the second highest on record, at $12.6 billion globally

•Flood losses in Australia broke the historical record as La Niña conditions persisted for a third year and Sydney recorded the highest annual rainfall

•Monsoonal floods in Pakistan were devastating, with countrywide rainfall from July to September at 175 per cent above average

•Both severe drought conditions and a prolonged rainy season in different regions of Latin America reduced agricultural crop yield across the region

Weather, Climate and Catastrophe Insight

Global natural disaster losses in 2022 are better covered by insurers who face their fifth costliest year in history

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Published January 30, 2023 at 7:44 am (Updated January 30, 2023 at 7:44 am)

Aon warning on climate change urges collaboration

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