After a horror year for natural disaster losses, an expert has said the industry, and the communities it serves, must prepare for volatility in disaster impacts.
While 2017 may have been one of the worst years in history in terms of the number of, and damage caused by, natural disasters, both for communities and the insurance industry, a recent Aon report found that the Asia-Pacific region had its lowest disaster losses since 2009.
Peter Cheesman, head of analytics, Aon Benfield, told Insurance Business that the swing between major losses and those that fall below historical averages show that the insurance industry cannot become complacent on natural disaster risk.
“The volatility of natural disasters does indeed highlight the need for insurers and communities to prepare,” Cheesman said.
“The insurance industry will benefit by supporting community awareness to inspire and educate communities about disaster planning and risks.”
Cheesman said that the North American hurricane drought provides a “great example” for remaining vigilant. From 2005-2016, there was a lack of hurricanes in the region, with the drought coming to a sudden end with hurricanes Harvey, Irma and Maria contributing to the biggest year of losses on record in 2017.
By remaining vigilant for disasters, even in gaps between them, Cheesman said the industry can improve awareness so communities can boost their resilience. He noted that there were 300 natural catastrophe events in 2017, with 97% being weather-related. 2017 was the 41st consecutive year, since 1977, of above average global land and water temperatures based on 20th century records. This could point to more disasters in future years.
“More heat and moisture in the atmosphere leads to more unstable weather patterns and can increase the risk of extreme events around the world,” Cheesman said.
“We know these kinds of events are going to happen and they are becoming increasingly volatile. The growing scale and impact of these events are a strong reminder of the need for holistic impact forecasting to deliver expert modelling and effective risk management planning.”
Notably, with Australia impacted by Cyclone Debbie and other, smaller storms, Impact Forecasting’s recent Climate & Catastrophe Insight: 2017 Annual Report found that 56% of Australian losses related to natural disasters were uninsured.
Cheesman said that the surprisingly high number is linked to under insurance, with the industry taking more responsibility when it comes to lowering the protection gap.
“The built environment continues to grow both in size and insurable value, often into areas of significant risk,” Cheesman said. “It therefore remains important to adopt adequate building codes that consider natural hazards and improve the resilience of homes to these hazards.
“We are seeing more insurance companies taking the responsibility to educate their customers around mitigation to better protect their homes, particularly in the more cyclone-exposed areas of Australia such as North Queensland. Fire emergency services also play an active role in educating the public when safeguarding themselves and their homes from bushfires.”
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