The increasingly costly weather catastrophes around the world fit in with the expected effects of climate change and highlight the Asia-Pacific region’s large insurance gap, according to a recent report.
Worldwide, natural disasters caused losses of US$280 billion in 2021, a substantially higher amount than in the two previous years, according to multinational insurer Munich Re’s Natural Catastrophe 2021 report. Storms, floods, wildfires and earthquakes destroyed assets worth US$210 billion in 2020 and US$166 billion in 2019.
The 2021 disaster statistics are significant because some of the extreme weather events are likely to become more frequent or more severe as a result of climate change, according to Munich Re, making greater loss preparedness and climate protection a matter of urgency.
“Even though events cannot automatically be attributed to climate change, analysis of the changes over decades provides plausible indications of a connection with the warming of the atmosphere and the oceans,” states Ernst Rauch, chief climate and geo scientist, and head of the climate solutions, at Munich Re. “Adapting to increasing risks due to climate change will be a challenge.”
Of 2021’s US$280 billion losses worldwide, only US$120 billion, were insured, leaving around 57% of losses uninsured. This insurance gap has declined over the last few decades in industrialized countries, whereas in poorer countries it remains unchanged at over 90% uninsured. And those affected must bear the financial losses themselves, or rely on aid.
“Greater insurance density can help people and countries to better cope with the financial consequences of a disaster and help them return to a normal life,” Rauch adds. “Developing concepts in partnership with governments (public-private partnerships) certainly makes sense.”
Of 2021’s US$280 billion losses worldwide, only US$120 billion were insured. Comparatively, the Asia-Pacific region had “modest” economic losses due to natural disasters of US$50 billion, of which US$9 billion were insured. The region accounted for just 18% of global losses and 7% of insured losses. However, the region, the report notes, has a large insurance gap, 83%, compared with the global average of 57%.
Asia's costliest natural disaster in 2021 was a severe flood in Henan province in central China, where a number of rivers, including the Yellow River, burst their banks, flooding areas, including hundreds of thousands of homes. Overall losses came to some US$16.5 billion, with only about 10% of these insured.
In February 2021, a 7.1-magnitude earthquake struck off the east coast of Japan causing losses of US$7.7 billion, with insured losses of approximately US$2.3 billion, an insurance gap of 70%.
“The natural disasters of 2021 have highlighted the enormity of the insurance gap in the Asia-Pacific region,” says Achim Kassow, a member of Munich Re’s board of management. “For example, only about 10% of the Henan flood losses in central China were insured.
“The earthquake close to the epicentre of the 2011 Tohoku earthquake saw insured losses of only around 20%. In spite of the obvious risk, earthquake insurance there is especially lacking among small businesses. And Super Typhoon Rai (Odette) in the Philippines was a humanitarian catastrophe.”
Greater insurance density in Asia, Kassow adds, will help disaster victims return to normality more quickly than in other regions.