In the Asia Pacific region, losses from natural disasters increased to approximately $70bn in 2022 with insured losses rising to around $10bn, according to global reinsurance giant Munich Re.
Mr. Achim Kassow, a member of the board of management of Munich Re, responsible for APAC, said, “Losses from natural disasters in the Asia Pacific and Australia in 2022 were around $70bn, which is $10bn more than in the previous year. What is alarming is that only a small proportion of this was insured, at around $9bn. When we exclude the largest insured losses in Japan and Australia, the insurance gap in the region extends up to 97%.”
He also said, “More needs to be done in the emerging markets to protect people and insure their growing assets against the financial shock of natural disasters – especially as weather disasters become more extreme due to climate change.”
As in the past, industrialized countries accounted for a high proportion of insured losses. Apart from the floods in Australia, an earthquake in Japan not far from the site of the 2011 Tohoku earthquake was the disaster with the highest insured losses in the region. The quake had a magnitude of 7.4, according to JMA (Japan Meteorological Agency), and caused overall losses of $8.8bn, of which $2.8bn was insured. Twelve years ago, a much stronger earthquake triggered a devastating tsunami and ultimately caused the Fukushima nuclear disaster.
In terms of overall losses, the 2022 earthquake was the second-costliest natural disaster in the Asia Pacific region after the floods in Pakistan.
In many instances, disaster losses in developing countries in Asia are almost totally uninsured. On the subject of the extreme financial consequences of natural disasters in poorer countries like Pakistan,
Mr. Ernst Rauch, chief climate scientist at Munich Re said, “Better prevention and early warning systems must contribute to improving protection for people. In addition, the Loss and Damage Fund agreed at the COP27 climate summit in Egypt and the Global Shield initiative presented there need to be promptly implemented as viable instruments. Also, binding, regulated compensation payments can help protect more people against the immediate financial consequences of disasters.”
In China, a protracted heatwave and drought, with temperatures of over 44°C in many parts of the country, led to water shortages and crop failures. The water level in the Yangtze, the longest and economically most important river in the country, receded significantly, as did the levels in many other rivers and reservoirs. In some areas, shipping was suspended and the electricity yield from key hydroelectric stations fell drastically. Several large industrial corporations had to temporarily suspend production.
According to rough estimates, the damage, including losses from crop failures, could be in the mid-single-digit billions, virtually none of which will have been insured.
Global Nat CAT losses in 2022
With overall losses of around $270bn (2021: $320bn) and insured losses of roughly $120bn (2021: $120bn), 2022 joins the recent run of years with high losses.
Overall losses were close to the average for the last five years, while insured losses were significantly above average (2017–2021: $ 97bn). The continued high level of insured losses is impacting insurers at a time when they are having to deal with both high inflation rates and a shrinking capital base due to rising interest rates. In contrast, the positive effect on investments from higher interest rates will only come in time.
Mr. Rauch said, “Two factors should be kept in mind when considering the 2022 natural disaster figures. Firstly, we are experiencing La Nina conditions for the third year in a row. This increases the likelihood of hurricanes in North America, floods in Australia, drought and heatwaves in China, and heavier monsoon rains in parts of South Asia. At the same time, climate change is tending to increase weather extremes, with the result that the effects sometimes complement each other.”
While US hurricane Ian caused the highest losses in 2022 by far, NatCats in Asia ranked 2-5 on the global list.