Elevated Severe Convective Storm Losses Reduced Protection Gap to 50 Percent, Aon 1H Global Catastrophe Report

Rhea-AI Summary

Aon plc's Global Catastrophe Recap for the first half of 2024 reveals global economic losses from natural disasters totaled $117 billion, below the 21st-century average of $137 billion. Insured losses reached $58 billion, surpassing the average of $39 billion. The insurance protection gap reduced to 50%, largely due to high payouts for U.S. severe convective storm (SCS) damage. U.S. natural disasters accounted for 80% of global insured losses, reaching nearly $46 billion.

Key events include Japan's Noto earthquake ($17 billion in economic losses) and a U.S. SCS period in March ($4.7 billion in insured losses). The report highlights the need for increased insurance coverage in emerging markets and anticipates a potentially costly hurricane season in the second half of 2024.

Positive

• Insured losses of $58 billion exceeded the 21st-century first-half average of $39 billion
• Insurance protection gap reduced to 50%, one of the lowest on record for first half
• U.S. natural disasters accounted for 80% of global insured losses, reaching nearly $46 billion
• Total number of fatalities from natural catastrophe events was the lowest since 2020

Negative

• Global economic losses from natural disasters totaled $117 billion in the first half of 2024
• 30 economic loss events exceeded $1 billion during the first half of 2024
• Japan's Noto earthquake caused over $17 billion in direct damage
• Expectations of a costly hurricane season in the second half of 2024

Financial Analyst

The report highlights that $117 billion in economic losses from natural disasters during the first half of 2024 is notably lower than both the 21st-century average and last year's figure. This is a positive sign for the global economy, as fewer resources are being diverted to disaster recovery. However, investors should note that the insured losses of $58 billion are still above the historical average, indicating that insurance companies might face increased payouts, which could impact their profitability in the short term. This is essential for stakeholders in insurance and reinsurance industries. One positive aspect, though, is the reduction of the protection gap to 50%, meaning more economic losses are being covered by insurance. This points to a healthier insurance market and better risk management. For retail investors, this might imply a stable insurance sector but also the need to be wary of firms heavily exposed to U.S. severe convective storms, which accounted for the bulk of insured losses.

Market Research Analyst

The reduction in the protection gap to 50% is particularly noteworthy. This metric represents the difference between total economic losses and insured losses and its reduction suggests a growing penetration of insurance coverage, especially in the U.S. This is beneficial for communities and businesses, as it provides greater financial resilience against natural disasters. For investors, this trend indicates a strengthening insurance ecosystem, potentially reducing volatility in markets affected by natural catastrophes. However, the emphasis on the U.S. could signify a lack of similar progress in emerging markets, highlighting an area of potential growth for insurance companies. Furthermore, with high expectations for the 2H 2024 hurricane season, there could be increased demand for reinsurance solutions, presenting opportunities for companies offering advanced data analytics and risk management services.

80 percent of 1H global natural catastrophe claims related to U.S. events

LONDON, July 18, 2024 /PRNewswire/ -- Aon plc (NYSE: AON), a leading global professional services firm, today published its Global Catastrophe Recap: First Half 2024 report, which cites a preliminary estimate of more than $117 billion in economic losses from global natural disasters during the first half (1H) of 2024. This figure was lower than the 21st-century 1H average of $137 billion, and significantly lower than the economic losses recorded in 1H 2023 ($226 billion).

Published by Aon's Impact Forecasting team, the report reveals that global insured losses for 1H 2024 were at least $58 billion – above the 21^st century 1H average of $39 billion, but lower than in the previous three years, where 1H insured losses exceeded $60 billion by end of June at current price levels. The total number of fatalities from natural catastrophe events was estimated at more than 6,000 during the period – significantly below long-term averages, and the lowest since 2020.

Meanwhile, Aon estimates that the insurance protection gap had reduced to 50 percent, one of the lowest on record for 1H, and largely the result of elevated insurance payouts for U.S. severe convective storm (SCS) damage. Indeed, U.S. natural disasters overall accounted for nearly 80 percent of global insured losses in 1H 2024, reaching nearly $46 billion.

The report highlights that 30 economic loss events exceeded $1 billion during 1H, 22 of which occurred in the U.S., two in South America, four in Asia, and two in EMEA. Japan's Noto earthquake on January 1 was the costliest 1H economic loss event, with more than $17 billion in direct damage. The costliest insured loss event was a period of SCS in the U.S. in March, estimated at $4.7 billion.

Apart from the high prevalence of SCS in the U.S., extensive flooding events in southern Germany, Brazil, the Middle East and China also contributed to the total global economic damage.

"It is great to see a lowering of the global protection gap, which is a result of the high levels of insurance coverage for the SCS events observed in the first half of 2024," said Michal Lörinc, head of Catastrophe Insight at Aon. "However, the re/insurance industry needs to continue its efforts to increase levels of insurance in emerging markets, through provision of not just capital and capacity, but also advanced data and analytics, which help to qualify and quantify the risk, and ultimately shape better decisions."

Andy Marcell, global CEO of Aon's Risk Capital and Reinsurance Solutions, said: "Our Risk Capital experts leverage analytics to bring capital to clients and ensure that the impact of natural catastrophes is spread across the risk transfer chain to protect communities and businesses."

The outlook for 2H 2024 is marked by heightened expectations of a costly hurricane season, as well as continuing SCS activity in the U.S. and Europe. By early July, the second named storm of the season, Hurricane Beryl, already resulted in potentially multi-billion-dollar losses.

About Aon
Aon plc (NYSE: AON) exists to shape decisions for the better — to protect and enrich the lives of people around the world. Through actionable analytic insight, globally integrated Risk Capital and Human Capital expertise, and locally relevant solutions, our colleagues provide clients in over 120 countries and sovereignties with the clarity and confidence to make better risk and people decisions that help protect and grow their businesses.

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Media Contact
Andrew Wragg
+44 (0) 7595 217168
andrew.wragg@aon.com

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FAQ

What were the global economic losses from natural disasters in the first half of 2024 according to Aon's report?

According to Aon's Global Catastrophe Recap report, global economic losses from natural disasters in the first half of 2024 totaled $117 billion.

How much were the insured losses for natural disasters in the first half of 2024 (AON)?

Aon's report states that global insured losses for natural disasters in the first half of 2024 were at least $58 billion.

What was the insurance protection gap in the first half of 2024 as reported by Aon (AON)?

Aon's report estimates that the insurance protection gap had reduced to 50% in the first half of 2024, one of the lowest on record for this period.

What percentage of global insured losses were attributed to U.S. natural disasters in the first half of 2024 (AON)?

According to Aon's report, U.S. natural disasters accounted for nearly 80% of global insured losses in the first half of 2024, reaching nearly $46 billion.