Of the $337 billion in insured losses from disaster events in 2017, $330 billion was caused by natural catastrophes, marking a nearly 90% increase from the previous 10-year average. If 2017 was an annus horribilis for the world and the risk-finance industry, which covered $144 billion of these losses, 2018 is on track to be even worse, since this is the year insurers will directly incur these costs on their balance sheets.
The big picture: Research shows that the world’s cities can expect on average $320 billion in lost economic productivity each year because of climate-related risks — climate change, floods, droughts, wild fires and heat-island effect, among others. Meanwhile, because more than 60% of these direct and indirect costs are not typically covered by insurance, insurers and public finance are in retreat as suppliers of last resort. For example, 60% of FEMA claims in Puerto Rico have been denied. Even against predictable threats like floods, earthquakes and wildfires, the protection gap is massive.