Flooding drove global economic losses for natural catastrophe in 2021
Three quarters of all flood-related losses were uninsured, suggesting a substantial lack of understanding about the potential risks and impact of flooding
Natural disasters accounted for a total global economic loss of US$270 billion in 2021, and insured losses of $111 billion (previously estimated at $112 billion), according to research by the Swiss Re Institute.
This represents a year-on-year rise in global economic losses from $203 billion in 2020, with a similar rise in $90 billion in insured losses.
Swiss Re says that this is the fourth highest figure on its records and continues a long-term trend of insured losses increasing by an annual average of between five and seven-per-cent worldwide.
Climate change is driving a rise in extreme weather events
Swiss Re says that climate change will continue to drive long-term trends towards more frequent and more extreme weather events, and that alongside factors such as growing populations, rapid urban development and the accumulation of economic wealth in disaster-prone areas, this will contribute to further rises in catastrophe losses.
The insurer says that ‘2021 was another year of intense natural catastrophe activity, including devastating floods in Europe, China, the US, and other parts of the world’. The European floods in July were particularly notable, being the costliest natural disaster on record for the region.
Global losses from floods amounted to $82 billion for 2021, accounting for almost a third (31 per cent) of all global economic losses due to natural disasters. Yet only around $20 billion (24 per cent) of flood-related losses were insured, indicating that there is a substantial protection gap.
Swiss Re warns that there is a severe ‘protection gap’ in coverage for flooding
The gap is most stark in emerging markets, where Swiss Re says only five-per-cent of all severe flood losses were insured over the past decade – however, even in wealthy advanced economies, only 34 per cent of severe flood losses were insured.
The largest gap in flood protection was in Asia, where only seven per cent of losses were covered. Europe was best prepared, with 34 per cent of all losses being insured.
“Floods affect nearly a third of the world population, more than any other peril. In 2021 alone, we witnessed more than 50 severe flood events across the world,” said Martin Bertogg, Head of Catastrophe Perils at Swiss Re. “Given the scale of devastation, flood risk deserves the same attention and risk assessment rigour as primary perils such as hurricanes.”
Swiss Re adds that the growing threat of flooding is likely to continue in the new year, as ‘already in the first quarter of 2022, major flooding in eastern Australia has caused widespread devastation and substantial insured losses’.
In the past decade, records show that flooding is by far the most frequently occurring natural peril, accounting for approximately three times as many major flood events as tropical cyclones, as well as the cause of more than a third of all natural disaster-related fatalities.