Typhoon Doxuri, which caused severe flooding across China last summer, was one of the costliest natural disasters worldwide in 2023, leaving a multi-billion-dollar shortfall in insurance coverage, according to experts.
German reinsurer Munich Re said on Tuesday that the disaster caused economic losses worth $25 billion, the second largest natural disaster in the world and the costliest in the Asia-Pacific and Africa region. Only 8%, or US$2 billion, of losses were covered by insurance – far less than other major natural disasters that occurred in 2023.
“The trend toward a reduction in the insurance gap, or increased insurance penetration” in high-income countries “has not been observed to a similar degree in China,” said Ernst Rauch, chief climate scientist at Munich Re.
Overall, only about 5 percent of disaster-related economic losses in China are insured in 2023, the company said, a slight increase from about 3 percent a few years ago but still well below the global average of 38 percent. . This situation leaves Chinese households and businesses vulnerable to increasing damage as climate change worsens extreme weather conditions.
The reinsurer called on China to push for the wider adoption of natural disaster insurance.
“The challenge is that the demand is not there,” Rauch said. “Consumers do not necessarily understand the benefit of insurance and how it helps people’s livelihoods during natural disasters. It is the responsibility of all stakeholders, including the private sector, insurance companies and governments, to inform people about how to protect themselves from these risks.
01:48
Tens of thousands have been affected by floods that hit southern Thailand after heavy rains
Tens of thousands have been affected by floods that hit southern Thailand after heavy rains
The gap between total economic losses and insured losses has widened, with only 36 percent, or US$90 billion, of global losses covered by insurance in 2023, compared to 50 percent of the US$250 billion in 2022 and 42 percent of losses. The five. An annual average of US$210 billion between 2018 and 2022, according to Munich Re.
Unlike previous years, such as 2022 with Hurricane Ian, which struck several South American countries and part of the United States, a large number of small and medium-sized events will lead to economic losses from natural disasters in 2023.
Storms accounted for more than US$100 billion in insured losses in 2023, with severe thunderstorms the main contributor, according to a report from the Swiss Re Institute last month. Losses from severe thunderstorms have been increasing steadily by 7 percent annually over the past 30 years.
Hong Kong sees scope for setting up a disaster bond hub amid climate crisis
Hong Kong sees scope for setting up a disaster bond hub amid climate crisis
“The cumulative effect of recurring low-loss events, coupled with increased property values and repair costs, has a significant impact on an insurer’s profitability over a longer period,” said Jerome-Jean Hegele, chief economist at Swiss Re Group. He said the high frequency of severe thunderstorms in 2023 was a test for the insurance industry’s primary profits.
According to Munich Re, 76 percent of total economic losses last year were weather-related, while 24 percent were due to geophysical causes.
“Multi-year global warming is changing the probability and intensity of extreme weather in many regions, increasing the potential for loss,” Rauch said. “Society and industry need to adapt to changing risks – otherwise the burden of loss will inevitably increase.”
The human toll from 2023 disasters was well above average due to the devastating earthquake in Turkey and Syria, which killed more than 50,000 people. Total deaths from natural disasters rose to 74,000 in 2023, from 11,400 in 2022 and the annual average of 10,000 over the previous five years, according to Munich Re.