"Many global communities are exposed to increasingly volatile weather conditions that are in part enhanced by the growing effects of climate change. This includes record-setting episodes of extreme temperatures, rainfall and flooding, droughts and wildfires, rapidly intensifying tropical cyclones and late-season severe convective storms," said Steve Bowen, meteorologist and head of catastrophe insight at Aon. (Credit: David Zalubowski/AP)
Slightly more than 400 notable natural disaster events were recorded in 2021, down from 416 in 2020, according to Aon plc. However, the expense and severity of the events during the past year resulted in $343 billion in economic losses, compared with $329 billion the year prior.
As a result, 2021 ranked as the third costliest year on record (adjusted for inflation) for economic loss due to natural catastrophes, the insurer reported.
Of the worldwide natural catastrophes, only 38% of the losses were covered by insurance during 2021, according to Aon. However, the global insurance gap of losses not covered fell 1% year-on-year, settling at 62% in 2021.
During the year, 50 instances of billion-dollar loss events were recorded, which is the fourth-highest year on record, according to Aon. Of those events, only 20 reached the billion-dollar threshold for insured losses. The U.S. saw 23 of these billion-dollar loss events during the year, as the country had an "exceptionally high" portion of natural catastrophe losses in 2021.
"Clearly there is both a protection and innovation gap when it comes to climate risk," Eric Andersen, president of Aon, said in a release. "As catastrophic events increase in severity, the way that we assess and ultimately prepare for these risks cannot depend on solely historical data. We need to look to technology like artificial intelligence and predictive models that are constantly learning and evolving to map the volatility of a changing climate."
Conditions conducive for wildfires
Conditions have become more favorable for the spread of wildfires, making the risk more prominent, according to Aon, which noted the term "fire season" has become outdated as the risk from wildfires stretches year-round.
In addition to wildfires in the U.S., major fires occurred in South America, Canada, the Mediterranean and South Africa.
"Many global communities are exposed to increasingly volatile weather conditions that are in part enhanced by the growing effects of climate change. This includes record-setting episodes of extreme temperatures, rainfall and flooding, droughts and wildfires, rapidly intensifying tropical cyclones and late-season severe convective storms," Steve Bowen, meteorologist and head of catastrophe insight at Aon, said in a release. "We can no longer build or plan to meet the climate of yesterday. With physical damage loss costs rising, this is also leading to lingering global disruptions to supply chains and various humanitarian and other asset-related services. The path forward for organizations and governments must include sustainability and mitigation efforts to navigate and minimize risk as new forms of disaster-related volatility emerge."
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