Natural disasters have been peppering newsfeeds for the last decade. In 2019, there were 409 natural events that caused $232 billion of economic damage. Of this amount, $229 billion was related to weather disasters. Last year was the eighth costliest year in terms of weather- related natural disasters and only $71 billion of this was covered by insurance. Of the $232 billion of economic damage, the United States represented 51% of the world’s insured losses. The US had $68 billion in economic loss and only $36 billion of this was covered by insurance. Flooding accounts for $20 billion in economic loss, while tornadoes, hail, and wind damage accounted for $3.6 billion of insured losses.
Climate changes have had a huge impact and are largely responsible for the spike in natural disasters. 2019 was the second warmest year on record for land and ocean temperatures since 1951. From 2010-2019 the cost in the US was $1.19 Trillion higher than 2000-2009. During this time private and public insurance entities paid out $845 Billion in U.S. dollars. Due to strong capitalization in 2017 & 2018, the reinsurance industry has been able to comfortably manage recent losses. However, as the economy changes, the rates will be impacted. An example of this is flooding. Flooding is a dilemma with Americans because there is a protection gap in the U.S. real-estate market. Flood damage is excluded from the standard homeowner’s policy; and only 15% of American homeowners have a flood insurance policy. While extreme weather pushes rates up in the flood insurance market, it makes the cost of obtaining these policies prohibitive. Aon predicts that financial costs are going to continue to increase in the coming years, which will in turn have an impact on insurance rates.