Insurance Industry Contends with Rising Losses as Climate Chaos Sweeps the Globe

The climate crisis is exacting a rising price from the global insurance industry, a relief and development agency says. As the world digests the news that 2020 was the joint hottest year on record, two reports attempt to assess how many billions of dollars are being lost as a result of an ever-warming planet.

Christian Aid, the UK- and Ireland-based charity, lists what it considers to be the 15 most serious climate-related disasters in 2020, and seeks to quantify them in financial terms, Climate News Network reports.

“COVID-19 may have dominated the news agenda in 2020, but for many people the ongoing climate crisis compounded that into an even bigger danger to their lives and livelihoods”, the organization states.

Six of the ten most costly disasters happened in Asia, many of them associated with an unusually prolonged and wet monsoon season. The charity estimates that floods in China cost US$32 billion, while extended rains in India cost $10 billion. Cyclone Amphan, which in May hit the Bay of Bengal region—one of the world’s most densely populated areas – caused losses valued at US$13 billion.

In Africa, unusually heavy rains and changing wind patterns are considered to have been the main factors behind devastating infestations of locusts, which caused an estimated US$8.5 billion of damage to crops in Kenya and other East African countries.

In its latest update on locust breeding and movement patterns, the UN’s Food and Agriculture Organization warns that swarms are likely to continue devastating crops across the Arabian peninsula and in East Africa in the weeks ahead.

Christian Aid says its calculations of financial losses resulting from climate crisis-related events are likely to be an underestimate. “Most of these estimates are based only on insured losses, meaning the true financial costs are likely to be higher”, the report says.

Insurance is a very unequal business: much of the property and economic infrastructure of the developing world is not insured, with the bulk of cover being in the US, Europe and other leading economies.

Swiss Re is one of the world’s biggest insurance groups. Its preliminary estimate of global insurance losses as a result of both what it terms natural catastrophes and man-made disasters in 2020 amounts to US$83 billion, up 40% on the previous year. A large chunk of those losses resulted from claims related to extreme weather events in the United States.

“Losses were driven by a record number of severe convective storms (thunderstorms with tornadoes, floods, and hail) and wildfires in the U.S.,” the company says. Wildfires in Australia were another contributing factor.

The group says climate change is likely to exacerbate what it calls secondary peril events, as more humid air and rising temperatures create extreme weather conditions, which in turn will result in more frequent wildfires, storm surges, and floods.

“While COVID-19 has an expiry date, climate change does not, and failure to ‘green’ the global economic recovery now will increase costs for society in future”, said Swiss Re Chief Economist Jerome Jean Haegeli. – Climate News Network