Did you know that the Italian army found themselves stuck in a quagmire at Derna, Libya, back in 1911 when floods washed down the wadi? Or that much of Washington DC near the White House was flooded back in 1889? In fact a carp was spotted swimming in the waiting room at Baltimore and Potomac railway station. These old flood/storm events had one thing in common; the value of the assets, even the lives of the human beings in their path, was not often not insured. Nor were those people over a century ago expected by law to carry insurance for cars, homes, business premises, stock, or much else.
So this release from Aon highlights how the increasing regulatory demands of the 21st century, to insure houses, commercial property, vehicles, laptops, retail stock and more means bigger bills for insurers. In reality, the climate isn’t changing as fast as the demand for claims settlements after any weather event. In the end this expectation of individual and corporate cash compensation for flood, storm, fire or other Cat events, which have been happening since man discovered writing in ancient times, will lead to a reckoning. No insurer can carry on covering every potential Cat loss, unless premiums rise drastically. This is why some insurers have withdrawn from the wildfire market in California and elsewhere; the value of assets in the pathway of – often deliberately set fires – outweighs the realistic premiums which can be charged to householders.
Maybe the solution is for all those who believe in the climate change narrative to chip into a government-backed scheme which acts like a sort of Pool Re? So a Cat Re insurance scheme would be funded by a voluntary tax, paid monthly by activists who want to see generous payouts when the worst happens. Politicians could call it a climate emergency relief fund and basically crowdfund nearly all the Cat cover anyone could wish for, assuming all the wealthy net zero campaigners put their cash where their placards are.
Solutions to insurance problems, that’s what we do at IE magazine.
Here’s the word from Aon;
Aon plc (NYSE: AON), a leading global professional services firm, has published its 2024 Climate and Catastrophe Insight report, which identifies global natural disaster and climate trends to help make better decisions to manage volatility and enhance global resilience.
The report reveals that the 398 global natural disaster events caused a $380 billion (2022: $355 billion) economic loss during the 12-month period under review – 22 percent above the 21st-century average – driven by significant earthquakes and relentless severe convective storms (SCS) in the United States and Europe.
Global insurance losses during the year were 31 percent above the 21st-century average, exceeding $100 billion for the fourth year in a row. With insurance covering only $118 billion (2022: $151 billion), or 31 percent of total losses, the ‘protection gap’ stood at 69 percent (2022: 58 percent), which highlights the urgency to expand insurance coverage.
The number of large-loss natural hazard events reached record levels in 2023, with 66 billion-dollar economic loss events, and 37 billion-dollar insured loss events. Earthquakes caused the most economic losses, while severe convective storms were most costly to insurers. New Zealand, Italy, Greece, Slovenia and Croatia all recorded their costliest weather-related insurance events on record.
The report highlights that 95,000 people globally lost their lives due to natural hazards in 2023 – the highest number since 2010 – resulting largely from earthquakes and heatwaves. In terms of climate, 2023 was the hottest year on record with ‘unprecedented temperature anomalies’, and all-time highs observed in 24 countries and territories.
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