Aon has shed light on the economic impacts of climate-related and natural disasters in Australia.
Its 2024 Climate and Catastrophe Insights Report revealed the considerable financial repercussions of climate-related events, especially highlighting the devastating weather conditions Australia experienced in December 2023.
The report presented a grim picture of the financial toll, pointing to an economic loss totalling AU$1.98 billion stemming from extraordinary weather phenomena.
Specifically, Cyclone Jasper, categorised as a Category 4 storm, was identified as the most intense tropical cyclone in terms of rainfall on Australian record, drenching the Far North Queensland area with over 2250mm (88.6 inches) of precipitation. This single event led to an economic fallout of AU$1.02 billion.
Furthermore, intense thunderstorms over the Christmas season prompted upwards of 65,000 insurance claims, cumulatively leading to an additional AU$952 million in economic losses. These events combined pushed the economic damage in Australia to over AU$1.98 billion within a mere fortnight.
On a global scale, the repercussions of natural disasters in 2023 were staggering, with total economic losses reaching around US$380 billion and insured losses estimated at US$118 billion. These figures represent a 22% increase over the average losses of the 21st century, signifying a rising trend in the severity and financial impact of these disasters.
It was noted that in the Asia-Pacific zone, insurance coverage accounted for only 9% of the losses, indicating a vast coverage gap.
The report also referenced Cyclone Tracy of 1974 as the most financially draining cyclone in Australia’s history when adjusted to 2023 values. However, the financial burdens brought on by Cyclone Jasper and the subsequent December storms underscore the persistent economic challenge posed by extreme weather conditions.
James Knight, senior analyst and head of catastrophe research and advisory (ANZ) at Aon, emphasised the crucial role of insurance and proactive disaster strategies in reducing the financial strain of severe weather incidents.
“Australia’s high exposure to extreme weather events and the significant regional protection gap across Asia underscores the importance of insurance coverage and disaster preparedness to mitigate the financial impact of severe weather events,” he said. “A more strategic approach to resilience and risk mitigation is needed. Communities and the industry as a whole must adapt and progress its overall resilience to extreme weather events. A greater focus on pre-emptive disaster preparedness and closing the insurance gap is needed to better improve the financial stability of Australian households and businesses against severe weather moving forward.”
Earlier this month, Aon launched a tool that will help its clients better visualise and understand their exposure to climate risks.
