Climate Events in Asia Create Opportunities for Collaboration and Innovation

In a year when many weather records were broken – findings in Aon’s 2024 Climate and Catastrophe Insight report show damage from global natural disasters in 2023 totaled USD$380 billion in economic losses and USD$118 billion in insured losses, with economic losses 22 percent above the 21st century average.¹

The Asia Pacific region emerged from the turbulent year relatively well, with total economic losses at USD$65 billion, 48 percent lower than the average and 32 percent below the median of the 21st century. Insured losses for the region totaled USD$6 billion, also notably below the 21st century average of USD$15 billion.

This does not mean the region was without incident. About half of the losses across Asia Pacific were related to flooding in China, which resulted in more than USD$32 billion of economic losses and USD$1.4 billion of insured losses.

Flood losses overall proved to be the costliest peril for the fourth consecutive year, accounting for more than 64 percent of the loss total in 2023 in Asia Pacific and 67 percent in Asia, with much of the impact stemming from flooding in South and Southeastern Asia, where the insurance penetration remains very low.

Mainland China, Hong Kong SAR, South Korea, India and Pakistan all saw significant flooding and record rainfall events across the year.

With climate variability we see natural hazards impacting areas that in recent times may have been largely unaffected, meaning those communities are generally under-prepared and may not have adequate insurance in place.

Areas with high populations are generally better equipped for natural disasters through investment and potentially higher insurance take-up, but the flipside is that the significant urban growth can lead to unforeseen risks, especially when it comes to unprecedented weather events.

In Hong Kong for example, typhoons are expected, and the associated risks are well understood. However last year’s rainfall-induced flash flooding was beyond the norm and exposed significant protection gaps.

Extreme heat was another unexpected peril in the Asian region in 2023. China endured a new national heat record with the temperature soaring to 52.2°C in July. More than 20 other countries and territories broke or tied their previous maximum temperature records.

Billions of dollars of losses also resulted from drought conditions in the region, particularly affecting China and India. It is becoming apparent that companies need to think about heat risk beyond their business output. Extreme heat can have broad and sweeping impacts – damaging infrastructure and negatively impacting operations, productivity and employee wellbeing.

Across Asia, there is significant opportunity for the insurance industry to work more closely with governments and institutions to help better protect communities. For example, the Japanese Government has been upgrading policies to construct stronger defenses against floods, storm surges and tsunamis. In 2020, the Japanese Government revised the fundamental policy for coastal conservation to consider climate change impact. Based on this updated policy, local governments have been updating their basic plans for coastal protection, e.g., this year the Tokyo Metropolitan Government released a revised plan for coastal conservation which reflected the new policy. According to this plan, some coastal levee heights will be raised to more than one metre. Similarly for river management, the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) released an update of the fundamental river management policy which also suggests incorporating climate change impacts. The insurance industry supports these hard measures with soft support in the form of quantification of risk and provision of risk transfer measures. Thoughtful consultation and collective decision making around where and how property is permitted to be built, identification of high-risk areas against a backdrop of climate change, and the creation of adequate mitigation practices will be the key to moving forward.

Using historical data to identify near-term risk has evolved to include the use of predictive analytics to quantify how climate change affects the frequency and severity of rare, but costly events. Climate analytics can provide forward-looking diagnostics for a range of scenarios, such as assisting a company to understand the risks at each specific location of their business. Climate modelling and risk assessments can also be used to help organisations gain a better understanding of protection gaps and associated insurance solutions.

To learn more, download Aon’s 2024 Climate and Catastrophe Insight Report.

Talk to our climate specialists to find out how we can help your organisation navigate the impact of climate change and to make better decisions about how to de-risk operations and build a more resilient future to protect people and property.

¹ Aon, 2024 Climate and Catastrophe Insight, www.aon.com/en/insights/reports/climate-and-catastrophe-report