Disasters Caused by Climate Change... Insurers Compensate 142 Trillion Won for Natural Disasters

$120 Billion Compensation for Natural Disasters
Including Uninsured Disasters, $270 Billion
Insurance Industry "Likely to Compensate $100 Billion Annually"

In August last year, disaster victims in Zafarabad, Balochistan province, southwestern Pakistan, are loading household items onto rafts to escape the flood-affected area.
[Image source=Yonhap News]

[Asia Economy Reporter Lee Ji-eun] It has been reported that the global insurance industry suffered losses amounting to $120 billion (approximately 142 trillion KRW) due to natural disasters caused by climate change, such as hurricanes and floods, the year before last. This amount is four times the average annual natural disaster loss ($31.1 billion) borne by the insurance industry over the past decade.

According to Bloomberg on the 9th (local time), Munich Re, the world's largest reinsurance company based in Germany, announced that the insurance industry's compensation losses from natural disasters last year reached $120 billion. This amount is comparable to Samsung Electronics' annual export value ($122.11 billion, July 2021 to June 2022). It also exceeds the $115 billion loss figure announced by the reinsurance company Swiss Re on the 3rd of last month. Including uninsured damages, the total losses caused by climate disasters rise to $270 billion.

More than half of the losses were caused by the damage from Hurricane Ian, which struck the United States in September last year. Additionally, Munich Re reported insurance losses of $4 billion due to floods in Australia and South Africa.

Insurance losses caused by natural disasters due to abnormal weather have surged dramatically in just 16 years. According to Munich Re, before 2005, the insurance industry's annual compensation losses from natural disasters never exceeded $50 billion. Swiss Re stated that the insurance industry's average annual natural disaster loss over the past decade reached $31.1 billion. The insurance industry estimates that, going forward, insurers will have to pay compensation amounting to $100 billion annually due to natural disasters caused by climate change.

However, while the amount of natural disaster damage is astronomically increasing, the countries receiving compensation are mostly concentrated in developed nations. Munich Re stated, "It is estimated that the massive floods that hit Pakistan last year caused losses amounting to $15 billion, with over 17,000 deaths and various waterborne diseases such as cholera," but added, "Pakistan had almost no insurance coverage to compensate for property damage."

As natural disasters grow so large that insurance companies find it difficult to bear the losses, and developing countries are unable to receive compensation, the international community is seeking new compensation methods to cover losses through cooperation. At the United Nations Climate Change Conference of the Parties (COP27) held in Egypt last November, countries around the world agreed to establish a 'Loss and Damage' fund to support vulnerable developing countries affected by climate change.

Sherry Rehman, Pakistan's Minister of Climate Change, explained regarding the fund, "This is not a choice to give charity," but "countries are making long-term investments to ensure our future can continue."