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Less than half of extreme weather events are covered by insurance 

Less than half of extreme weather events are covered by insurance 

A man and a girl use a makeshift raft as they cross a flooded street, following rains during the monsoon season in Hyderabad, Pakistan on August 24 the 24th 2022. Photo credit: Reuters / Yasir Rajput.

By Anders Lorenzen

As the amount of climate-fueled extreme weather events increase, attention has turned to mitigating the consequences through insurance.

In 2022 extreme weather events resulted in a direct economic cost of $360 billion and only approximately 40% of those were covered by insurance providers according to reinsurance broker Gallagher Re. In a report of theirs they stated that of that $360 billion, total insured losses were estimated at $140 billion, with private insurers covering $125 billion and public insurance entities covering $15 billion, making 2022 the fifth year since 2017 to cross the $100 billion threshold for insurers.

In the US, Hurricane Ian led to storm damages of nearly $55 billion for both public and private insurance entities and an overall economic loss of $112 billion in the US alone, without taking into account the damages outside the country. In an additional report by the US National Centers for Environmental Information, there were another 18 individual weather and climate disasters which each exceeded $1 billion in losses.

Loss and damage

Outside the US, the costliest event, and the most critical from a humanitarian perspective, was the floods in Pakistan which the World Bank estimated at a $15 billion economic loss.

At last year’s UN climate conference, COP27 the concept of ‘loss and damage’, finally saw some progress. It focused on rich countries paying for the damages of climate fuelled extreme weather events happening in poorer countries. 

Scientists are becoming better at linking extreme weather events to climate change and it is now very rare for an extreme weather event to occur with no link at all to the burning of fossil fuels.

This latest report should be seen in the context that it can be tricky to accurately predict financial costs of extreme weather events in poorer countries but that the cost is likely going to be higher than those predicted. It’s also worth bearing in mind that even though Hurricane Ian was the costliest event, it is not necessarily the most damaging or severe extreme weather event.

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