AIR Estimates Global Annual Insured Catastrophe Losses at $106 Billion

On average, catastrophes around the world are expected to cause annual insured losses of $106 billion, according to extreme event modeling firm AIR Worldwide.

The estimate is from AIR's 2021 Global Modeled Catastrophe Losses report, which details global financial loss metrics based on AIR's latest suite of models reflecting near-term climate risk.

AIR estimated the one-in-20-year annual insured loss at $203 billion and the one-in-100-year annual insured loss at $320 billion.

"While there has been justifiable concern about extreme event losses over the last few years, outside of 2017, actual global insured losses have been below the modeled long-term average," Bill Churney, president of AIR Worldwide, said in a statement. "Our report shows that the global insurance industry should currently expect a long-run annual average loss of $106 billion. This notably exceeds the actual average loss of the past decade of approximately $75 billion and is a stark reminder that we have been fortunate to not have had a major tropical cyclone or earthquake event in a highly populated region.

"However, such events can and will occur under the climatic conditions of today, and society must continue to focus on ensuring resilience to the risks of today while also looking forward to how risk may change in the decades ahead," Mr. Churney said.

AIR's 2021 report also provides estimates of global economic losses from catastrophes, which highlight the insurance protection gap that could limit countries' ability to recover from major catastrophes. Based on its research, AIR determined that global economic losses are about three times higher than global insured losses on average.

The percentage of economic loss from natural disasters varies considerably by region, AIR said. In North America, about 50 percent of the economic loss from natural disasters is insured. Meanwhile, in Asia and Latin America, insured losses account for only about 12 percent and 24 percent of economic losses, respectively, due to lower insurance penetration in those regions, according to AIR.

The portion of economic losses that is insured also varies significantly by peril, AIR said, with coverage for flood and earthquake losses typically much lower than for wind and fire.