APAC nat cat losses cost $70 billion in 2022

With overall losses of around $270 billion (previous year $320 billion) and insured losses of roughly $120 billion (the same as in the previous year), 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 the average of $97 billion. Both natural and human-induced climate cycles were significant drivers, along with the steady growth of exposures at risk.

Hurricane Ian was the most costly event of the year and the second most costly US landfalling hurricane in history, causing an estimated $60 billion in claims.

“Two factors should be kept in mind when considering the 2022 natural disaster figures,” explains Ernst Rauch, Chief Climate Scientist at Munich Re. “Firstly, we are experiencing La Niña 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.”

Asia-Pacific heavily impacted by natural disasters

In the Asia-Pacific region, losses from natural disasters increased to approximately $70 billion. Insured losses rose to around $10 billion.

As in the past, industrialised 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 $8.8 billion, of which $2.8 billion 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, this year’s 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, Ernst Rauch had this to add:

“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.

Climate change and El Nino drive major flood events

The year’s second-costliest and greatest humanitarian disaster was severe flooding in Pakistan resulting from record-breaking monsoon rainfall. In the month of August, rainfall there was between five and seven times heavier than usual.

Accelerated glacier melt as a result of the high temperatures significantly increased the flooding. At least 1,700 people were killed. Direct losses are estimated to be at least $15 billion – an enormous amount given the size of the country’s GDP.

Almost nothing was insured and countless people lost all their belongings. Researchers estimate that the intensity of an event of this kind has already increased by half because of climate change, and that it will continue to rise in future.

For insurers, the second-costliest single natural disaster in 2022 was flooding in the southeast of Australia in February and March. 

Of the overall losses of approximately $6.6 billion, just under $4 billion was insured. In October, torrential rainfall again resulted in disastrous flooding in the southeast of the country. However, losses were not as severe as those at the start of the year. Overall, floods in Australia caused losses of $8.1 billion last year, of which $4.7 billion was insured.

Natural cycles play an important role in Australian flood risk, as torrential rainfall is much more likely during La Niña years. However, researchers now believe that climate change is additionally influencing the intensity of the rainfall.

The same is true for bushfires and heatwaves, which tend to occur in El Niño years, the opposite phase to La Niña.