Aon estimates 2023 insured nat cats at $118bn as protection gap rises to 69%

Aon has pegged insured natural catastrophe losses at $118bn for 2023, with perils traditionally considered as primary or peak – tropical cyclone, earthquake and European windstorm – accounting for just 14 percent of the total.

In its new Climate and Catastrophe Insights report, the broker said the amount of disaster losses covered by insurers represented 31 percent of total economic losses.

This suggests a protection gap of 69 percent, above other industry estimates from Gallagher Re (66 percent), Munich Re (62 percent) and Swiss Re (~62 percent).

Aon’s tally of $118bn of public and private insured losses is below Gallagher Re’s $123bn estimate but above the $95bn estimate from Munich Re and Swiss Re’s provisional $100bn tally.

Analysis by Aon shows the majority of economic losses were covered in the US, as is typically the case, with a larger proportion of losses uninsured in other regions.

The largest uninsured losses during 2023 occurred in Turkey (~$80bn) as a result of the 6 February earthquakes, which Aon said had caused insured losses of $5.7bn.

The US accounted for 67 percent of global insured losses in 2023, with a protection gap of just 30 percent.

Aon estimated US severe convective storm losses at $58bn during 2023, with 23 individual billion-dollar events. The costliest event was the 1-3 March outbreak, which Aon said had cost insurers $5bn.

On a global basis, Aon estimated severe convective storm losses at $70bn, compared with an average of $24bn for the 2000-2022 period.

During the same period, tropical cyclone has been the costliest peril for insurers, with an average annual loss of $30bn. However, tropical cyclone losses were significantly below average during 2023, estimated by Aon at $6bn.

The report noted that five countries – New Zealand, Italy, Greece, Slovenia and Croatia – experienced their costliest weather events on record during 2023.

In his foreword to the report, Aon CEO Greg Case said 2023 had demonstrated how severe weather and climate-related risks “now pose an existential threat to the way we live and work”.

“Out of the 66 natural catastrophes that caused a billion dollars or more in damages in 2023, 63 of them were caused by weather. Yet only 40 percent of weather and climate related losses were covered by insurance in 2023.

“There is a tremendous opportunity to close this protection gap, provide real value to clients, and fundamentally strengthen the impact of our industry on how society responds to severe weather and climate risks.”

Case said collaborative action was essential to developing effective solutions to meet this challenge.

“Because climate risk is such a complex problem, no single industry or discipline can solve it alone. Businesses, governments and the scientific community are realising that they need to bring all of their capabilities together to address climate risk,” he said.