COVID-19: What the Virus Meant for Natural Disasters in 2020

COVID-19: What the Virus Meant for Natural Disasters in 2020
COVID-19: What the Virus Meant for Natural Disasters in 2020
February 24, 2021 17 mins

COVID-19: What the Virus Meant for Natural Disasters in 2020

Two firefighters climb ladders onto the roof of a burning building.

The COVID-19 pandemic was unprecedented. The insurance industry can adopt new strategies to prepare for future catastrophes.

Key Takeaways
  1. The insurance industry plays an important role in risk-based conversations.
  2. Identification of risk is the first and most crucial step in preparing for risk.
  3. Human risk can be minimized during disasters by properly reducing vulnerability.


COVID-19 dominated the news in 2020. Along with the unprecedented effects of a pandemic, we also saw record-making natural disasters and catastrophes. Aon’s Weather, Climate & Catastrophe Insight: 2020 Annual Report details how last year’s events cost $268 billion and exposed a 64 percent protection gap.

Steve Bowen, Director and Meteorologist and Head of Catastrophe Insight at Aon, discusses how the pandemic highlighted additional vulnerabilities and how to better prepare for a future of interconnected risk.

Q: How did the Pandemic Affect the Aftermath of Natural Disasters and Weather Events in 2020?

The prospect of a pending natural disaster and the post-event recovery/response is always a difficult endeavor for even the best prepared countries. The volume of natural disaster events in 2020, including several that had widespread impact across multiple states and countries, led to above-average disaster costs and forced federal governments to tap into already depleted emergency funding to account for the many billions of dollars in non-insured damage and recovery aid.

Perhaps the most challenging aspect for local and federal officials, even beyond the fiscal requirements, was the planning process around large-scale evacuations and post-event temporary housing procedures in the COVID-19 environment. Many countries enacted social distancing and strict screening guidelines that required new evacuation center set-ups that limited the number of evacuees per facility. The lack of facilities led to many people being sent by organizations to non-traditional displacement shelters for longer-term housing, most frequently a hotel. In other cases, regions facing tropical cyclones or inland flooding placed COVID-19 patients in “emergency hospitals” that were often identified in high-risk hazard areas. These unintended consequences put heightened strain on the need for quick and complex resilience planning.

The other difficulty was locating enough volunteers to aid and/or be deployed in the hardest-hit areas to begin the relief and recovery process. Organizations such as the International Federation of Red Cross and Red Crescent noted some regional spikes in volunteer sign-ups, but many were asked to respond to disasters virtually and often to provide mental health support. The frequency of larger-scale events, notably in the United States, Central America, and Asia, stretched resources thin.

Q: How did the Pandemic Affect the Insurance Industry’s Response to Natural Disasters and Catastrophes?

One of the more visible challenges around COVID-19 was the response regarding the claims process. Varying restrictions around social distancing and public health safety limited the number of assessors that were deployed in the aftermath of events. This inevitably led to delays in some claims being processed and/or approved. Many (re)insurers began to incorporate new technologies to aid the claims process. Among the most notable was the introduction of drones to conduct survey assessments from the air. Other companies relied on their clientele to take numerous pictures or videos of the damage to support the approval process.

Q: Increasingly, Risk is Complicated by Interconnected Events and Situations. How did You see this Show in 2020?

Prior to 2020, this topic was already gaining more attention as public- and private-sector groups further recognized the direct tie between natural disasters, climate change, healthcare, insurance, food insecurity, infrastructure, and other various societal and geopolitical topics. Years such as 2011 and 2017 were particularly notable as major natural disaster events led to localized physical damage impacts but then created a cascading effect of secondary and tertiary global fiscal impacts far beyond where the events occurred.

The amplified effects realized in 2020 would have been challenging enough had it only been defined by the frequency of extreme weather events. These extreme events occurring in the COVID-19 environment only enhanced the humanitarian impact. Delays in the shipment of typically standard international aid (such as food, healthcare supplies, etc.) prolonged the initial recovery efforts that many developing or emerging countries are heavily reliant. It also increased the delivery cost of aid as supply shortages and enhanced safety precautions required more monetary requirements. As a result, the United Nations increased their humanitarian aid appeal for 2021 to $35 billion — up from $28 billion in 2020. It also anticipated 235 million people, or equal to one in 35 people worldwide, needing assistance from natural peril, geopolitical, or COVID-related incidents. Most help will be targeted in 56 of the most vulnerable nations on earth.

Q: Companies and Communities are Wondering How to Prepare for the Future and — Increasingly — Interconnected Risks. What do You See Looking Ahead?

COVID-19 highlighted areas which need considerable improvement around both planning for and anticipating various scenarios. The identification of risk is a critical first step.

One valuable solution which can help invoke a risk planning strategy is around risk mapping. These tools can not only highlight the hazard risk down to a granular level, but also identify areas that may require improved building code requirement or enforcement. However, this type of solution is likely more realistic for more developed nations. Countries that face more widespread wealth inequality — meaning a higher portion of the local population living in poverty or with limited financial means — will require different methods to aid in risk management.

There are also opportunities to rethink access to capital with solutions such as catastrophe bonds or parametric insurance. This trigger-based approach can quickly bring an influx of fiscal aid into areas which are not able to depend on federal dollars.

While natural hazards cannot be eliminated, the physical and human risk can certainly be minimized or mitigated against by properly reducing vulnerability.

The insurance industry has played — and will continue to play — an important role in these risk-based conversations. The industry has access to an enormous volume of data and has increasingly hired experts in earth science, geoscience, actuarial analysis, and other data-driven backgrounds into the field.

Being able to combine this scientific expertise with brokers, underwriters, and analytical experts puts the industry in excellent position to provide key commentary on future mitigation strategies.

Risk will never go away. How we work together to implement lessons learned from highly complex years such as 2020 will prove critical in the future

General Disclaimer

The information contained herein and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information and use sources we consider reliable, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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The contents herein may not be reproduced, reused, reprinted or redistributed without the expressed written consent of Aon, unless otherwise authorized by Aon. To use information contained herein, please write to our team.

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