Flood Losses Cause Highest Economic Impact in 2016

According to an annual report by reinsurance intermediary firm Aon Benfield, flood losses caused the highest economic impact for the fourth consecutive year. The 2016 Annual Global Climate and Catastrophe Report evaluates the impact of natural disaster events that occurred worldwide over the last 12 months.

The report reveals that there were 315 natural catastrophe events in 2016 that generated economic losses of USD210 billion. For historical context, 2016 was the seventh highest year on record, with the combined economic loss exceeding the USD200 billion threshold for the first time since 2013.

The top three perils—flood, earthquake, and severe weather—combined for 70 percent of all economic losses in 2016. Overall, only 26 percent of these economic losses were covered by insurance. In addition, total private and public insurance industry losses were the highest since 2012.

There were at least 34 natural disasters that caused more than USD1 billion in economic damage around the globe, though just 11 of those events had insurable losses reach the same threshold. The vast majority of the billion-dollar events (30) were weather-related, and only nine had insured losses at or above USD1 billion.

Events identified as key drivers of economic and insured losses for 2016 included the following.

• Flood losses were the costliest overall peril at USD62 billion (30 percent of the total). The most significant flood events were along the Yangtze River basin in China and in the state of Louisiana.
• Earthquakes in Japan were the costliest event both economically (USD38 billion in losses) and for the insurance industry (USD5.5 billion).
• Six of the top 10 costliest insured loss events occurred in the United States, including Hurricane Matthew and multiple severe weather outbreaks.
• The United States experienced 14 individual billion-dollar economic loss events, and Asia-Pacific experienced 13 such events—compared to four in EMEA and three in the Americas.

According to Steve Bowen, Impact Forecasting director and meteorologist for Aon, "After a decline in catastrophe losses during the previous four years, 2016 marked a bit of an uptick in natural peril costs to the global economy. When recognizing that we have seen a nominal increase in both annual and individual weather disaster costs in recent decades, we recognize that factors such as climate change, more intense weather events, greater coastal exposures and population migration shifts are all contributors to the growing trend. With these parameters in place, and forecasts continuing to signal greater risk and vulnerability, it is anticipated that weather-related catastrophe losses will further increase in the coming years. The data and analysis in this report will help businesses, communities, governments, and the insurance/reinsurance industry to better prepare and help mitigate the growing risks of these disasters."