Climate change fueled 3rd costliest losses ever in 2021 -- less than half of that property was insured
By Rachel Koning Beals
Led by the deadly and costly Hurricane Ida and massive flooding in Europe, the world racked up $329 billion in economic losses linked to severe weather last year, and only 38% of that bill was covered by insurance.
Those results prompted consultants
Total economic losses tallied $343 billion,
Related:The 10 most expensive climate-change disasters of 2021 cost $170 billion -- and this U.S. storm was No. 1
Natural disasters happen every year, but the collective scientific community has warned that warming global temperatures create more extreme weather, sometimes pushing hurricanes further inland or extending what is typically thought of as storm season for a particular region.
Wildfires in California and elsewhere increased in prominence as conditions have become more conducive for rapid fire spread. The term "fire season" is becoming officially outdated as the risk of dangerous wildfires is prevalent during the full calendar year,
Read:This mandate helped reduce risk of wildfires destroying buildings in California by 40% -- so why don't more states implement it?
"There's no question that the finger prints of climate change are already here today... more intense weather, impacting more things in harm's way," Steve Bowen, meteorologist and head of catastrophe insight at
Modern life means both that it is more efficient to warn people when severe weather lurks, allowing for property protection and flight to safety, but also that ever greater development along vulnerable coasts and in population clusters puts more lives and structures in the path of destruction.
As the burning of oil and gas send the bulk of carbon and other emissions into the atmosphere, last year was the world's sixth-warmest year on record. Land and ocean temperatures were 0.84degC (1.51degF) above the 20th century average, by some measures. The hottest temperature ever reliably measured on Earth was unofficially recorded in Death Valley, Calif., on July 9, 2021, at 54.4degC (130degF). And the decade that just ended was the hottest for a 10-year time span ever.
Read:Scorched Western states and a hurricane in New York: Earth experienced one of its hottest years on record in 2021
50 billion-dollar disasters
While 2021 economic losses were up from 2020, the number of notable disaster events slightly decreased, which means fewer events overall proved just as costly; 401 notable disaster events were recorded in 2021, down from 416 in 2020.
There were 50 instances of billion-dollar economic loss events, the fourth highest year on record. And only 20 of those had enough insurance on the property involved to cover the billion-dollar threshold.
Costs were even greater outside the U.S., as Germany, Belgium, Austria, Luxembourg and China recorded the costliest insurance industry events on record,
MunichRe, the German reinsurer, says its calculations show global losses caused by natural disasters came to $280 billion compared with $210 billion in 2020 and $166 billion in 2019.
Many insurance and reinsurance plans -- coverage for the consumer-facing insurers themselves -- are renewed on a short-term basis, often annually. It can be hard to account for the damages that unchecked global warming could bring in the coming decades, which influences everything from credit for major construction projects to preventative measures, such as sea walls.
"Climate change is not necessarily causing all these things, but it is enhancing these events and in areas where the impact was much smaller before," said Bowen. "But we're not pricing (coverage) for 100 years, we're trying to price for next 365 days, so it can be rolling the dice. Still, the repetitive type of losses over 20 years makes it easier to get a sense where price changes are needed."
"Multi-peril" events are also on the rise. For instance, Hurricane Ida, which cost more than $75 billion in economic losses, hit several U.S. states in late summer 2021. Ida was not limited to its coastal impact along the Gulf of Mexico. Powerful storm remnants hit the populous Northeast, bringing costly flooding inland as well as tornadoes as far as Pennsylvania and other places.
High water, high stakes
The system for insuring against flood damage is getting increased scrutiny as climate change intensifies.
Currently, the federal government, via the National Flood Insurance Program (NFIP), is the primary insurer when it comes to floods, handling both the determination of what makes up a flood zone and the insurance claims. Flood zones, for instance, can influence what degree of insurance a lender might require if borrowing for a property.
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But beginning last fall, the NFIP began a complete overhaul to make insurance pricing more accurately reflect each property's unique flood risk, it says. And, finally, climate change will be factored in.
"No question that this is the most substantive change to the program going back to 1968," David Maurstad, deputy associate administrator for federal insurance and mitigation and senior executive of the flood insurance program, said at the time.
Read: National Flood Insurance Program leaves out communities of color, lower-income Americans, report finds
Whether the changes and fresh eyes come about fast enough if still open to debate, said
"There's a big challenge with flooding. We see changes in land use and altering the terrain on a daily basis... Texas, Florida, the Southeast (U.S.)... the government will really need to be updating these [flood-zone] maps more frequently. We see critical higher risk today than even five years ago," Bowen said.
Asked if there will be a market for private insurance to pick up where government insurance leaves off, especially when it comes to flood protection, Bowen added: "If private insurance sees that premiums are fairly priced for properties that are highest risk, we could see growing appetite for private to take a bigger role in the market."
"That would require a fundamental change to flood insurance, but I think some [across the business community] would welcome that."
Read:Blame it on the rain: Climate change has caused billions of dollars in flood damages
Shrinking world, growing risks
Rising physical damage loss is leading to lingering global disruptions to supply chains,
Even without the added risk of climate change, strained supply chains and the ripple effect of higher inflation are already showing what can happen in the face of a global pandemic that clamps down on trade flow.
"When your physical locations [such as a manufacturing plant or a logistics center] are damaged from greater weather events, business suffers from that interconnectedness and that can lead to longer waits or higher costs for the end-consumer," said Bowen.
He explained that demand for the already existing "business interruption" policies -- for instance the type of claims that kicked in when the Texas ice storm power outage shut down busy parts of that state -- are likely to jump in demand as climate change persists.
-Rachel Koning Beals
(END) Dow Jones Newswires
January 25, 2022 21:41 ET (02:41 GMT)
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