Global protection gap hits 64% amid pandemic; nat cat losses reach $268bn: Aon
An analysis of catastrophe losses in 2020 shows that the protection gap for weather-related events is rising amid the socioeconomic volatility caused by the global COVID-19 pandemic - highlighting the increasing possibility of "connected extremes", according to Aon CEO Greg Case.
Aon's report, which evaluates the impact of global natural disaster events to identify trends, manage volatility and enhance resilience, found that 416 natural catastrophe events led to economic losses of $268 billion in 2020 — 8 percent above the average annual losses for the century.
Of that total, private sector and government-sponsored insurance programmes covered $97 billion, creating a protection gap of 64 percent, which is the portion of economic losses not covered by insurance.
The biggest driver of catastrophe losses in 2020 was tropical cyclone peril, causing more than $78 billion in direct economic damage. It was closely followed by flooding ($76 billion) and severe convective storm ($63 billion). The report noted that more than 8,000 people lost their lives due to natural catastrophes.
The US National Oceanic and Atmospheric Administration (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.
Steve Bowen, director and meteorologist for Aon's Impact Forecasting team, commented: "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.
"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."
Case said: "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.
"This report highlights the increasing likelihood of 'connected extremes' and reinforces that leading organizations of the future will be defined by their ability to manage the global implications of concurrent catastrophic events."
He added: "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."
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