Aon pegs 2022 insured nat cats at $132bn and renews calls to close protection gap

Aon has estimated public and privately insured natural catastrophe losses will total $132bn for 2022, the fifth costliest year on record.

  • Tropical cyclone is costliest peril driven by $50bn-$55bn of Hurricane Ian losses
  • Protection gap of 58% ranks alongside 2005 as lowest on record due to high US impacts
  • Aon CEO Greg Case calls for renewed efforts from industry to close protection gap
  • Severe convective storm insured losses total $38bn in 2022 with drought costing $12bn

The broker pegged Hurricane Ian losses at between $50bn and $55bn, a range which again includes publicly insured losses such as those incurred through the National Flood Insurance Program.

Ian’s impact meant tropical cyclone was the costliest peril for insurers in 2022, ahead of severe convective storms (which saw cumulative losses of $38bn) and US and European drought losses, which totalled $12bn.

Aon estimated the global economic cost of natural disasters at $313bn for 2022, giving a protection gap of around 58 percent with roughly 42 percent of losses covered by insurers.

This ranked alongside 2005 as the lowest protection gap on record – in both years this was due to large insured losses from US hurricanes, where insurance take-up is highest.

Notable natural disaster trends highlighted by Aon within its annual review also include higher frequency of medium-sized severe convective storm events in the US and Europe as well as the prevalence of flooding events in Africa, Southeast Asia and Oceania.

Five events topped the $10bn economic loss threshold in 2022 – Hurricane Ian, European drought, US drought, Pakistan floods and China floods – but of those only Ian caused insured losses in excess of $10bn.

Closing the protection gap

In his foreword to the report, Aon CEO Greg Case cited the “tremendous opportunity” the industry has to close the protection gap and protect vulnerable communities and strengthen the economy.

The executive said clients were highlighting three risks that could hold companies back from taking a leading role in solving the climate crisis.

“They are telling us the industry continues to leave the playing field by excluding climate-related triggers and exiting challenged geographies; tax the net-zero transition by opting out of entire sectors and inadvertently making the transition to clean energy harder; and ignore the accelerators by moving too slowly on adjacent markets,” Case said.

“The good news is that there are examples of where the industry has forged a better path: choosing to stay in the game, facilitate a just transition and provide ways to bring new solutions to market quicker.”

He cited catastrophe bonds as one example of this – having initially been created to provide post-event cover for traditional risks, these now also encourage pre-investment in research and development that can accelerate the clean energy transition by assuring certainty of funds to deal with the impact of traditional claims.

“In another case, we have developed an industry-leading capability to enable a company to accurately value its intellectual property, and then use it as an asset to finance growth,” Case said.

“This allows them to bypass traditional funding and accelerate their time to market. For many green technology companies, this is becoming their best option.”

Fatalities remain below average

Global fatalities from natural disasters totalled 31,300 during 2022, significantly below the 21st century average of 73,200.

Aon said roughly two-thirds of these fatalities can be attributed to European heatwaves in June and July, with thousands of people killed by flooding in Pakistan and India.

The broker said the number of annual human casualties has shown a notable decline in recent decades.

“The improvements in forecasting, evacuation planning and strategies, increased public awareness and better building practices have all played a key role,” the broker said.

However, Aon said the steadily increasing cumulative death toll from heatwaves highlighted the growing significance of perils that pose a threat to human health and wellbeing but not necessarily to property and infrastructure.