Extreme weather events continue to reveal significant vulnerabilities across Asia Pacific
Aon plc (NYSE: AON), a leading global professional services firm, has published its 2024 Climate and Catastrophe Insights Report, exploring global natural disaster and climate trends and the effects they have on Australia’s economic stability.
The report found that record-breaking rainfall in December 2023 carried an AU$1.98 billion economic loss. Cyclone Jasper, which peaked at Category 4 and made landfall in December 2023, was the wettest tropical cyclone in Australian history, bringing more than 2250 mm (88.6 inches) of rain across the Far North Queensland region. The historic weather event, which incurred an economic loss of AU$1.02 billion, was compounded by the severe thunderstorms at Christmas, resulting in more than 65,000 claims and economic loss of AU$952 million, for total combined economic losses of more than AU$1.98 billion in a two-week period.
Globally, natural disasters incurred an estimated US$380 billion in economic losses and an estimated US$118 billion in insured losses, with economic losses recorded at 22 percent above the 21st century average. In Asia Pacific, only nine percent of losses were covered by insurance.
While Cyclone Tracy in 1974 remains the most expensive Australian cyclone to date (normalised to 2023 values), Cyclone Jasper and the December storms’ combined AU$1.98 billion economic losses illustrate the continued cost of extreme weather events.
James Knight, senior analyst and head of catastrophe research and advisory (ANZ) at Aon said, “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.
“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,” Knight concluded.
Further warming from anthropogenic climate change is projected to influence the current frequency and severity of extreme weather events.
Knight said, “Our changing climate is influencing the behaviour of extreme weather events. Moving forward, this trend presents both challenges and opportunities for Australian insurers. Insurers can help Australians better understand and mitigate risk by becoming more resilient to these events over time. Innovation in product offerings from insurers, keeping risk assessment based on the current climate, and prioritising the most important resilience-based actions are all needed.
“Insurers can play a pivotal role in enhancing national resilience but this needs to be a collective effort from both public and private sectors. Reducing the exposure of properties to natural hazard risk makes a lot of sense and needs to be driven from council planning. Incentivising personal resilience measures through reduced premiums for example is one approach that insurers could take to help.
Read the full Climate and Catastrophe Report Pacific Insights report article here.
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