Swiss Re estimates that natural catastrophes and severe weather events around the globe cost the insurance industry $19 billion in the first half of this year, with a further $21 billion of economic impact uninsured. The protection gap is all the more stark in emerging countries: for example Cyclone Idai caused $2 billion in economic loss, only 7% of which was insured. Closing this gap would greatly help in disaster recovery.
Once again Swiss Re draws attention to "secondary peril events" such as torrential rainfall and snowmelt, thunderstorms, heatwaves and dry weather. They estimate that these gave rise to $32 billion of economic losses in H1 2019, of which only $13 billion was insured. Climate change is expected to make these events more frequent: for example heatwaves and dry weather will lead to an increase in wildfires and agriculture losses.
Society will need to adapt to this volatile "new normal", and the forthcoming flagship report from the Global Commission on Adaptation will provide authoritative guidance on that topic. Insurance has a key role to play, including parametric (index) cover which we covered in a report last year.
The experience of the first half of this year has once again exposed the existing protection gap issues in emerging countries. For example, cyclone Idai showed just how fragile African coastal communities are. And in India, cyclone Fani inflicted widespread damage and large uninsured losses.