US disasters deal costly blow to global insurance industry, according to Aon
Aon Benfield, a leading reinsurance and catastrophe modeling firm, has released its latest Annual Global Climate and Catastrophe Report. The report highlights the impact that natural disasters have had throughout the world and how these disasters have hit the global insurance industry and economy. According to the report, two of the world’s costliest natural disasters occurred in the U.S. While these disasters were largely confined to the borders of the country, Aon notes that their influence has sent ripples throughout the global insurance industry.
Hurricane Sandy produces $65 billion in damages
The report identifies Hurricane Sandy as one of the worst disasters in 2012. The hurricane, which was reported to be a Category 2 at the height of its strength, was modest in terms of wind damage. The bulk of the damage caused by the storm came in the form of widespread flooding. Because Hurricane Sandy struck an area of the country that is home to dense population centers, the damage caused by floods was appropriately amplified. According to the Aon report, Hurricane Sandy produced $65 billion in damages.
2012 drought causes $35 billion in losses
The second disaster identified in the report is the 2012 Midwest/Plains drought. Aon notes that this disaster caused $35 billion in damage, much of which comes from sustained losses in the agriculture sector even after the drought had ended. Beyond damage to crops, the drought caused widespread fear throughout the U.S., largely due to predictions of a catastrophic food shortage. No such shortage has yet emerged as a result of the drought.
US represents 90% of world’s insured losses in 2012
The report from Aon shows that these two natural disasters accounted for 67% of the world’s insured losses in 2012. The U.S. alone represents nearly 90% of the world’s insured losses last year when all of the natural disasters the country experienced throughout the year are combined. This is significantly higher than the 64% figure that the country typically represents from year to year. Aon notes that this is not shocking information in and of itself, as the U.S. has traditionally been home to the costliest natural disasters in the world, somewhat due to the fact that highly populated cities are in so called “risk zones.”