Natural Catastrophes Caused USD 65 Billion Economic Loss in Asia Pacific in 2023

Tuesday 2 Apr 2024, 10 : 59 pm

SINGAPORE –  Aon plc (NYSE: AON), a leading global professional services firm, today published Asia Pacific insights from its 2024 Climate and Catastrophe Report, which identifies natural disaster and climate trends both globally and for Asia Pacific, to help businesses make better decisions to manage volatility and enhance resilience.

The report reveals that 398 natural disaster events occurred globally in 2023, resulting in a USD 380 billion (2022: USD 355 billion) economic loss during the 12-month period under review – 22 percent above the 21st-century average – driven by significant earthquakes and relentless severe convective storms (SCS) in the U.S. and Europe.

Economic losses in the Asia Pacific region specifically, driven primarily by floods in China and drought in India, reached USD 65 billion – 48 percent lower than the 21st-century average.

Meanwhile, the ‘protection gap’ – the proportion of total losses that were uninsured – for Asia Pacific stood at 91 percent, with only 9 percent of losses, or USD 6 billion, of economic losses covered by insurance.

This is below the 21st-century average of USD 15 billion, highlighting the urgency to expand insurance protection in the region.

George Attard, CEO of Reinsurance Solutions for Aon’s Asia Pacific region, said: “The findings from Aon’s 2023 Global Risk Management Survey for Asia Pacific demonstrate that although climate change is not featured in the top ten, it directly impacts four of the top ten risks for businesses, that is business interruption, rapidly changing market trends, supply/chain distribution failure and regulatory or legislative changes. With climate driving new extreme weather records, businesses increasingly need to quantify and address the direct and indirect impact of climate risk. Businesses must therefore leverage advanced analytics and experts to help analyse climate trends and make better decisions to address risks and increase the resiliency of their operations, workforces and the communities they impact.”

Flooding remains a recurring threat 

The 2024 Climate and Catastrophe Insight report reveals that flooding remained a recurring threat in Asia Pacific, with annual losses having exceeded USD 30 billion every year since 2010.

Flood losses overall proved to be the costliest peril for the fourth consecutive year, accounting for more than 64 percent of the loss total in 2023.

About half of the Asia Pacific losses were related to flooding in China, which resulted in more than USD 32 billion economic losses and USD 1.4 billion of insured losses.

Many places saw significant flooding and record rainfall events in 2023, including Hong Kong, South Korea, India, and Pakistan.

The South Asia floods (Pakistan and India) resulted in nearly 2,900 fatalities. Much of the impact stemmed from regions where insurance penetration is very low.

Areas with high populations are generally better equipped for natural disasters through investment and potentially higher insurance take-up, but the flipside is that the significant urban growth can lead to unforeseen risks, especially when it comes to unprecedented weather events.

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