Last year saw insurers pay out $50 billion in insured losses from natural disasters, according to The Guardian.
The Kyushu Island earthquakes in Japan ranked as the two largest disasters. These two events saw insurers pay out $6 billion from $31 billion in total damages.
Chinese flooding last summer near the Yangtze River caused $28 billion in losses, and was the largest weather-related disaster cost wise in 2016, said Jeff Masters of Weather Underground. Strikingly, only $300 million was insured from this disaster, the third-largest non-US weather disaster in recorded history.
October’s Hurricane Matthew, which pounded the Caribbean and US East Coast, was a $10.2 billion disaster, but only $3.8 billion of the damage was insured.
2016 resulted in the largest amount paid out by insurance from natural disasters since 2012, according to Munich Re. Torsten Jeworrek, a Munich Re board member, mentioned to The Guardian after three consecutive years of low insured natural disaster losses, 2016 insured costs were “in the mid-range.”
“Losses in a single year are obviously random and cannot be seen as a trend,” Jeworrek told The Guardian.
Last year also saw a dramatic spike in insured flooding costs, making up 34% of all insured natural disaster losses. The 10 year average is 21%.
European flooding from intense summer rainstorms in Paris, France, and Germany saw insurers pay out 50% of the $6 billion in total overall costs from the storms.
One concern Jeworrek has is “the high percentage of uninsured losses especially from emerging markets and developing countries.” With China’s flooding, last summer only amplifies the concern on both increased costs of natural disasters and uninsured losses from these events.
The insurance industry has been explicit about its concern for the economic costs of climate change. The Canadian Broadcasting Corporation (CBC) discussed that concern over climate change from the insurance industry (including Munich Re) began in the early 1970s, twenty years before first Rio Earth Summit in 1992.
Increased temperatures from human-made carbon emissions affect precipitation patterns and cause more extreme weather events. Every increase of 1°C in temperature will reportedly increase precipitation by 7%. For example, if the temperature increases 2–3°C, precipitation will increase by 14–21%.
More torrential rainstorms as seen last year in Louisiana and Houston, Texas will occur. However, global warming also means more extreme droughts will occur, like in California, as precipitation evaporates more quickly.
The insurance industry understands very well what impacts lay ahead economically from climate change, as they will have to dole out large amounts of money from these extreme events. Now policymakers will have to understand the size of such costs better. As CBC’s Don Pittis best sums it up:
“But for now, people in the insurance industry are hard-nosed realists. They expect weather disasters caused by climate change to get worse before they get better. So we better get used to it.”
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