The Evolving Climate Impact on Natural Catastrophe Risk

Natural catastrophe risk continues to evolve. As weather phenomena become increasingly impactful to residential and commercially-linked assets around the world, it is now more important than ever to understand how these risks are growing. The scientific and socioeconomic ties are both equally important. Emerging trends from resultant financial and humanitarian impacts of the last two decades alone show increased influence from climate change, extreme weather variability, and continued growth of exposure into some of the most vulnerable spots in the world.

The financial cost of weather-related disasters is quickly approaching USD4.0 trillion in just the 21st Century. More than half - USD2.3 trillion - has occurred since 2010 following a series of significant tropical cyclones (Harvey, Sandy, Irma, Maria, Michael, Florence, Irene, Jebi, Haiyan, Trami, Fitow), major inland flood events (United States, Thailand, China, India, Japan, Australia), severe convective storms (United States, Europe, Canada, Australia), wildfires (United States), and droughts (United States, Europe, Asia, South America).

Despite the high economic cost to residential and commercial property, infrastructure, and agriculture, roughly 70 percent of these costs have not been covered by insurance. The protection gap - the portion of economic damage not covered by public or private insurance entities - remains a major issue in emerging, developing, and developed countries. This gap has forced important new conversations as to how insurers can enter untapped markets with new policy solutions such as parametric insurance, catastrophe bonds, insurance risk pools, or public/private partnerships to ensure greater protection in the advent of the next disaster.

We know that weather events have always and will always occur. We know that climate change is influencing atmospheric and oceanic patterns to create more unusual weather patterns and impacts. We know that population and exposure patterns continue to move into some of the most vulnerable locations for natural peril risk. The good news is that the awareness of these risks has never been greater, and the emergence of new technologies and additional scientific breakthroughs will only lead to more solutions. The challenge will be the speed of which these solutions can be implemented given the understanding that weather/climate/socioeconomic risks will only become more complex in the future.

To learn more about the growing risks associated with climate change and the financial implications that the global economy faces, please attend our panel at Aon’s 2019 Hazards Conference. For more details, visit: https://www.aon.com.au/australia/hazards-conference-2019

Steve Bowen
Director & Meteorologist, Head of Catastrophe Insight, Aon
Panel Discussion 09.50am - 10.45am
Wednesday, 25 September