2023 sets record for billion-dollar disasters

The top 10 global economic loss events in 2023. (Source: Aon plc)

Some 398 global natural disaster events caused US$380 billion in economic losses in 2023, says Aon in its 2024 Climate and Catastrophe Insight report. That was 22 per cent above the annual average seen over the past 22 years and was driven by significant earthquakes and relentless severe convective storms, says the global professional services firm.

Global insurance losses during the year were 31 per cent above the average seen in the 2000s, exceeding US$100 billion for a fourth year in a row. With insurance covering only US$118 billion, or 31 per cent of total losses, the “protection gap” stood at 69 per cent, which the company says highlights the urgency to expand insurance coverage.

Aon publishes the report to help companies identify global natural disaster and climate trends so that they can make better decisions to manage volatility and enhance global resilience.

According to the report, the number of large-loss natural hazard events reached record levels in 2023, with 66 economic loss events valued at a billion dollars or more, and 37 billion-dollar-plus insured loss events.

Earthquakes caused the most economic losses, while severe convective storms were most costly to insurers.

The report highlights that 95,000 people globally lost their lives due to natural hazards in 2023 – the highest number since 2010 – resulting largely from earthquakes and heatwaves. In terms of climate, 2023 was the hottest year on record with what the report authors called unprecedented temperature anomalies, and all-time highs observed in 24 countries and territories.

“Amidst increasing volatility and complexity, there is a significant opportunity for organizations to become more resilient to the climate and catastrophe risks highlighted in our report,” said Greg Case, CEO of Aon. “By working across the private and public sector we are accelerating innovation, protecting underserved communities and better addressing the economic impacts of extreme weather to create more sustainable outcomes for businesses and communities around the world.”

“The findings of the report highlight the need for organizations – from insurers to highly impacted sectors such as construction, agriculture and real estate – to utilize forward-looking diagnostics to help analyze climate trends and mitigate the risk, as well as protecting their own workforces,” added Andy Marcell, CEO of Risk Capital and CEO of Reinsurance at Aon. “Risk managers can take advantage of increasingly sophisticated tools and leverage analytics to unlock capital and make better decisions. Equally, the insurance industry plays a critical role in improving the financial resilience of communities within their portfolios and taking the opportunity to bridge the protection gap with new and relevant products.”

With efforts to limit global warming, investors can consider climate change from three perspectives: protecting their portfolios against financial risks; benefiting from growth opportunities in climate solutions, and determining how to have a positive impact and play a role in a world moving to net-zero.

“The report highlights how communities can be vulnerable to disasters in different ways. For example, earthquakes in 2023 highlighted underinsurance and the importance of regulation and enforcement of building codes,” said Michal Lörinc, head of Catastrophe Insight at Aon. “In addition, deadly floods – notably in Libya and India – reinforce the necessity for proper maintenance of infrastructure while the Hawaii fires demonstrated the critical need for reliable warning systems and forecasting.”

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