According to a study by reinsurance firm Munich Re, global disasters caused by climate change created $210 billion in damages in 2020 as many countries, including the U.S. and China, fought hurricanes, floods and wildfires. Global monetary losses in 2020 were up 26.5% compared to the expense of $166 billion in 2019, Munich Re said. Last year, $82 billion worth of loss was covered, up from $57 billion in 2019. The natural disasters of last year took nearly 8,200 lives.
Torsten Jeworrek, Member of the Board of Directors of Munich Re, noted that natural disaster losses in 2020 were significantly higher than in the previous year. A cause for concern is the record statistics for many related hazards. Reinsurers, who provide insurance firms with financial security, have seen their share prices drop over the course of 2020. Over the past 12 months, shares of Munich Re, Berkshire Hathaway, Swiss Re, and AIG fell 1.5 per cent, 2.7 per cent, 14.3 per cent, and 21 per cent, respectively.
The United States Faced a Record Year of Damage in 2020
In 2020, natural disasters in the United States accounted for overall losses of $95 billion, compared to $51 billion in 2019. Of last year’s 10 most costly global natural disasters, six occurred within the U.S. The most destructive event in the country was Hurricane Laura, which hit Louisiana in August, costing $13 billion, of which $10 billion was insured.
The North Atlantic hurricane season was hyperactive, hitting hurricane status with 13 out of 30 storms. The overall damages from the North American hurricane season amounted to $43 billion, of which $26 billion was covered. Meanwhile, in total damages, extreme thunderstorms in the Midwest cost $40 billion, up 33 per cent compared to $30 billion in 2019.
In California, Colorado, and Oregon, gross damages from wildfires amounted to nearly $16 billion, of which $11 billion was covered, as the planet experienced one of the hottest times in more than 100 years.
The struggle of developed countries with insurance cover shortage
The shortage of insurance coverage for disasters in developed countries was one of the issues that the study highlighted. The largest individual loss of $17 billion was due to floods in China, but only about 2 per cent of that was covered. Total losses in Asia were $67 billion, and although the cost of damage was 13% less than in 2019, just $3 billion was insured in 2020.
Losses from Europe Were Benign
With $12 billion in total damages and $3.6 billion in insured losses, Europe’s natural disaster estimates were relatively benign. Localized extreme losses were caused by heavy rainfall along France and Italy’s Mediterranean coasts, while in December Croatia suffered the most severe earthquake in 140 years.
According to the NCEI, a division of the National Oceanic and Atmospheric Administration, a range of factors are contributing to the rise. For one, in insecure areas, Americans simply have more physical assets than in decades past. For coastal purposes and in river floodplains, much of the recent housing development has occurred, which is at greater risk when hazardous weather events occur.
What are the financial Effects of Natural Disasters?
From hurricanes and earthquakes to droughts and floods, natural disasters have the ability not only to upend the lives of local people, but also to produce huge costs for governments, businesses, and individual residents. Significant disasters, including the Katrina and Harvey hurricanes, have left tens of billions of dollars of damage in their wake.
These costs are most acutely borne by individual owners of property in the affected area. However, through state and federal disaster grants, as well as mortgage insurance plans that pay for most of the reconstruction afterwards, the public often picks up a substantial part of the bill. The fact that in recent decades we have seen large-scale natural disasters with greater frequency means that the financial effect is becoming more expensive than in recent history at any time.
Meanwhile, the coronavirus epidemic is proving to be more costly than all of the natural disasters faced by the U.S., not to mention the worldwide economic effects in the aftermath of the global pandemic. To that end, President Trump signed into law on March 27th a $2 trillion coronavirus emergency stimulus bill, called the CARES Act.
Natural Disasters Becoming More frequent
Although dangerous weather conditions have often occurred, government information suggests that they have occurred more frequently over the past few years. The decade from 2010-2019 saw 119 climate and weather events that cost $1 billion or more, according to the National Centers for Environmental Information, or NCEI. Together, those events caused annual damage to an average of $80.2 billion.
The decade before that, from 2000-2009, the United States had seen just $59 billion in activities, at an average expense of $52 billion. And the 1990s saw far less global weather disasters, 52, costing $27 billion a year on average.
The NCEI (National Centers for Environmental Information)also claims that global climate change is making these incidents more frequent than in previous decades. In the U.S., this change can have a wide range of consequences, including drought and increased wildfires in the country’s western part and greater rainfall in the Eastern States.
Since the average temperature of the planet has been ticking up at a reasonably steady rate, the frequency of these climate-related events will only rise in the years to come. Nine of the ten warmest years on record have occurred since 2005, according to the NCEI. At 2.07 degrees Fahrenheit above the pre-industrial average, last year was the second-warmest ever.
Who’s responsible for natural calamities?
Both direct and indirect costs to the economy are caused by the environment and weather-related calamities. Whether it’s damage to commercial buildings and homes or the need to repair roads and power lines, the direct costs are even more apparent. But natural disasters can have a less evident effect on local areas, through the destruction of corporations due to infrastructure damage or the failure of workers to return to work.
Although a variety of disasters are capable of causing significant property damage and trade interruptions, hurricanes have become the costliest events in recent history. Their combination of high winds and heavy rainfall can wreak havoc in a matter of days or even hours over a wide geographic region.
A variety of public and private sources usually collect the expenses for hurricanes and other events.
What is the Bottom Line?
History has shown that natural disasters are capable of costing states, corporations, and private people a high financial toll. The frequency of storms and other weather-related events happening is picking up because of climate change. And because Americans want to build in vulnerable areas, they are continuously increasing the average cost of reconstruction.