Global insured losses top $186bn, but Australia dodges a bad cyclone season

While billions of dollars’ damage was caused by flooding last year at least Australia experienced fewer cyclones, says risk-assessment company Aon.

Damage left by Hurricane Ian in the US. Picture: AFP

Despite billions of dollars in losses flowing from floods which smashed Australia’s east coast last year, consultancy Aon says the nation still benefited from a below-average cyclone season.

And that has kept cyclone insurance losses below their long-term average.

In a report released on Thursday, Aon said 2022 had been the fifth most expensive year ever for insurers, although much of the damage was uninsured.

Aon chief executive Greg Case said the natural disasters that struck in 2022 “created a staggering amount of economic loss”, with at least $US313bn in global damage coming from weather and catastrophic events including earthquakes and storms in 2022.

Of this, almost $US299bn in losses were triggered by weather events alone.

Aon recorded insured losses of almost $US132bn ($186bn) from catastrophic events last year.

Hurricane Ian, which smashed the US and Cuba in late September, triggered almost $US52.5bn in insured losses after the weather front rolled up the Caribbean and over the Florida panhandle.

The drought, which gripped the US west coast, caused almost $US8bn in insured losses, as farmers drew down on crop cover.

Floodwaters at Camden in Sydney's southwest in March 2022. Picture: Jillaine Duve

Australia’s east-coast floods which, according to Aon, caused $US4bn in insurance loss, were the seventh most expensive insured event for the year behind the US damage.

Aon said significant inflation that affected global economies in 2022 had “resulted in notable increases of per-event losses”.

But in its report, Aon noted socio-economic factors continued to be the primary driver of an increasing number of catastrophic and damaging events.

“In 2022, the world human population exceeded eight billion and, since 2000, increased approximately 30 per cent,” Aon said.

“In the same time frame, the global GDP increased by a staggering 80 per cent (in constant prices). Increasing exposure and wealth is expected to result in higher and more frequent losses – even if the hazard remained the same.”

Australia’s floods, which were Australia’s most expensive insured event, caused $8bn in economic losses as towns and cities were inundated after torrential rain.

Sydney was hit with its wettest year on record, with 2530mm of rain recorded in 2022.

But, Aon noted Australia was subsequently hit by two further flooding catastrophes in July and October, which were not included in its tally.

Australia’s listed insurers faced a torrid year from natural catastrophes.

Flooding at McGraths Hill, NSW, in March 2022. Picture: Ben Talintyre

Suncorp said it faced $530m in insured losses from weather events that had struck Australia between July and October.

This was after posting $1.16bn in natural hazard losses in the 2022 financial year – $101m above already elevated allowances.

Insurance Australia Group was hit with $1.19bn in natural catastrophe losses in the year, $354m above allowances.

But Aon said the insurance bill for Australia in 2022 was actually muted, with tropical cyclone losses in Oceania running 91 per cent below their 21st century averages.

“This greatly contributed to the relatively low natural disaster losses for 2022,” Aon said.

“The number of fatalities from tropical cyclones were also lowest in at least 66 years. This is not only a result of below-average activity, but also improved disaster response and adaptation measures.”

Aon’s report noted that tropical cyclones and severe storms were the most expensive events to deal with.

Tropical cyclones have run up almost $US660bn in insured losses since 2000.

Severe storms have resulted in $US539bn of insured losses in the past 22 years.