Natural disasters in 2021 highlights huge insurance gap in Asia-Pacific: reinsurer

Yujie Xue, South China Morning Post

Posted at Jan 11 2022 06:00 AM | Updated as of Jan 11 2022 06:28 AM

A general view of the damages caused by typhoon Odette, in Surigao City, on December 19, 2021. Picture taken December 19, 2021. Jilson Tiu, Greenpeace handout via Reuters
A general view of the damages caused by typhoon Odette, in Surigao City, on December 19, 2021. Picture taken December 19, 2021. Jilson Tiu, Greenpeace handout via Reuters

Natural disasters caused economic losses of US$280 billion globally in 2021, making it the second-costliest year on record, according to Munich Re, the world’s largest reinsurer.

Less than half this amount was covered by insurance, the company said. The Asia-Pacific region, though its losses were modest, lagged the rest of the world on this metric – only a fraction of its losses were insured.

Last year’s US$280 billion figure was substantially higher than the US$210 billion in 2020 and the US$166 billion in 2019.

Insured losses totalled around US$120 billion last year.

The economic cost of catastrophes in Asia-Pacific came to US$50 billion, accounting for just 18 per cent of the global total, according to Germany-based Munich Re. However, only US$9 billion of that was insured, leaving an insurance gap of 83 per cent, much wider than the global average of 57 per cent.

“The natural disasters of 2021 have highlighted the enormity of the insurance gap in the Asia-Pacific region,” said Dr Achim Kassow, a member of Munich Re’s management board.

The costliest natural disaster in the region last year was the severe flood caused by heavy rainfall in central China’s Henan province in July. More than 300 people lost their lives and 50 more are still missing.

There were also huge property and agricultural losses. According to Munich Re, the overall economic cost was around US$16.5 billion, with only about 10 per cent of that insured.

A 7.1-magnitude earthquake struck off the east coast of Japan last February, causing losses of US$7.7 billion. The insured loss was just US$2.3 billion, creating an insurance gap of 70 per cent.

Globally, the US accounted for the highest share of natural disaster costs in 2021, at roughly US$145 billion, of which some US$85 billion was insured. The world’s most expensive natural catastrophe was Hurricane Ida that hit the US and Canada between late August and early September, causing overall losses of US$65 billion of which US$36 billion was insured.

The flash flooding that followed extreme rainfall in Germany last July was the second costliest disaster worldwide in 2021, with an overall loss of US$54 billion, of which US$13 billion was covered by insurance.

Weather disasters are widely predicted to be exacerbated by climate change, which makes it all the more urgent for asset owners to take measures to protect against losses.

“The 2021 disaster statistics are striking because some of the extreme weather events are of the kind that are likely to become more frequent or more severe as a result of climate change,” said Ernst Rauch, head of the climate solutions unit at Munich Re.

“Greater insurance density can help people and countries to better cope with the financial consequences of a disaster and help them return to a normal life.”

Developing public-private partnerships with governments could help prevent uninsured damage, he added. 

RELATED VIDEO

Watch more on iWantTFC