With 2018 behind us the numbers are finally in, and they are a doozy. According to the Aon report “Weather, Climate & Catastrophe Insight— 2018 Insight Report” the total economic cost of 2018’s 394 natural catastrophe events came to a grand total of $225 billion. Of that, $90 billion was covered by U.S. insurance.
You’re not wrong to think that those numbers are high. In fact, the report went on to note that 2017 and 2018 were the highest costing back-to-back years on record for economic losses due to weather-related events and for insured losses across all perils.
With only $90 billion covered of the $225 billion in total losses the insurance protection gap is at 60%. That gap hasn’t been that low since 2005. Now, to understand what that means you first have to fully understand what the insurance protection gap is. As the Insurance Journal describes it, the insurance protection gap “…is the portion of economic losses not covered by private sector or government-sponsored insurance programs.”.
The reality is that natural disasters are not going away. If the scientific consensus is to be believed they are only going to become more severe, and more frequent. Knowing that, it quickly becomes clear that the insurance landscape is going to have to adapt.
Steve Bowen, director and Meteorologist at Aon’s Impact Forecasting team spoke with the Insurance Journal about this need for adaptation. “The complex combination of socioeconomic shifts in population and exposure into vulnerable locations, plus a changing climate contributing to more volatile weather patterns, is forcing new conversations to sufficiently handle the need for mitigation and resilience measures,” said Bowen. “Natural disasters are always going to occur. How well we prepare can and will play a key role in future event losses.”.