Natural disasters cause $65bn loss in APAC in 2023; 91% loss uninsured: Aon

As per the report, 398 natural disaster events occurred globally in 2023, resulting in an economic loss of $380 billion in the year.

Natural catastrophes / disasters such as earthquakes, storms, floods, tropical cyclones and droughts caused an economic loss amounting to $65 billion in 2023 in the Asia Pacific (APAC) region, said a recent note by Aon – a leading global consulting firm headquartered in London that offers a range of risk-mitigation products.

“Economic losses in the Asia Pacific region specifically, driven primarily by floods in China and drought in India, reached $65 billion – 48 per cent lower than the 21st-century average. Meanwhile, the 'protection gap' – the proportion of total losses that were uninsured – for Asia Pacific stood at 91 per cent, with only 9 per cent of losses, or $6 billion, of economic losses covered by insurance. This is below the 21st-century average of $15 billion,” the NYSE-listed Aon said in a recent report.

The report revealed that 398 natural disaster events occurred globally in 2023, resulting in a $380 billion (2022: $355 billion) economic loss during the 12-month period under review – 22 per cent above the 21st-century average – driven by significant earthquakes and relentless severe convective storms (SCS) in the US and Europe.

 

 

“The findings from Aon's 2023 Global Risk Management Survey for Asia Pacific demonstrate that although climate change is not featured in the top ten, it directly impacts four of the top ten risks for businesses, that is business interruption, rapidly changing market trends, supply/chain distribution failure and regulatory or legislative changes,” said George Attard, CEO of reinsurance solutions for Aon's Asia Pacific region.

Opening the floodgates

The 2024 Climate and Catastrophe Insight report reveals that flooding remained a recurring threat in Asia Pacific, with annual losses having exceeded $30 billion every year since 2010.

Flood losses overall, the report said, proved to be the costliest peril for the fourth consecutive year, accounting for over 64 per cent of the loss total in 2023.

“About half of the Asia Pacific losses were related to flooding in China, which resulted in more than $32 billion economic losses and $1.4 billion of insured losses," the Aon report said.

 

 

Many places, according to the report, which saw significant flooding and record rainfall events in 2023 include Hong Kong, South Korea, India, and Pakistan. The South Asia floods (Pakistan and India), it said, resulted in nearly 2,900 fatalities. Much of the impact stemmed from regions where insurance penetration is very low.

Extreme heat

Meanwhile, with economic losses of nearly $13 billion and insured losses of $1.4 billion, tropical cyclone losses for Asia and Oceania were 53 per cent, and 70 per cent below their 21st-century averages.

The Asia Pacific region was also rocked by several large earthquakes in 2023. Nearly 1,500 people, Aon's report said, were killed after a series of earthquakes in Afghanistan's Herat Province in October, and over 200,000 homes were damaged in China's Gansu Province in December.

Extreme heat was another unexpected peril in the Asian region in 2023. Parts of the APAC region experiencing prolonged periods of extreme temperatures in 2023. China, the Aon report suggests, endured a new national heat record with the temperature soaring to 52.2°C in July 2023.

“Notably, a multi-week-long heatwave impacted many countries in South and Southeastern Asia in April and May. Additional losses in billions of dollars resulted from drought conditions that affected China and India particularly,” the report said.