Global insured losses from disasters could reach $80 billion in 2016

Global average annual losses from catastrophes could total about $80.0 billion in insured losses for 2016, according to an updated model by AIR Worldwide released Tuesday.

The Boston-based catastrophe modeling firm’s 2016 Global Modeled Catastrophe Losses report estimates that the 100-year return period loss from catastrophes worldwide is about $252.9 billion overall for 2016. 

While only $80 billion of global average annual losses would already be insured, about $160.2 billion total is insurable, according to the report. 

“A large difference between insured and insurable losses may indicate cases where the risk is not fully understood and society is inadequately prepared to respond,” the report stated. “For regions and perils covered by existing catastrophe models, this difference presents not only potential growth opportunities for the insurance industry to offer essential protection to vulnerable home and business owners, but a responsibility to act.”

The average annual loss in North America — which encompasses Canada, the United States, Bermuda and Mexico — was estimated at $49.0 billion in insured losses for 2016, but the estimated insurable loss was $87.3 billion, according to the report. Asia was second with an average annual loss projected at $13.9 billion but an insurable loss pegged at $43.9 billion. Europe’s average annual loss was estimated at $9.7 billion, but AIR projected the insurable loss at $15.4 billion. 

Tropical cyclones at 30% and severe storms at 29% are projected to be the biggest contributors to global insured losses, followed by crop incidents at 17%, according to the report. But earthquakes would be the biggest contributor to insurable losses — 32% — across all regions. 

The new estimates factor in one new model introduced this year for India earthquake risk and changes in the risk profile resulting from updated models, including those covering U.S. terrorism and crop hail risks and Southeast Asia typhoons.

AIR’s models covered 77% of the global reported insured losses for 2015, but industry insured losses can and do occur from perils and in regions that the firm does not currently model, according to the report.

For example, the industrial explosion in Tianjin, China, in 2015 accounts for $3.5 billion in nonmodeled insured losses. In addition, smaller events such as multiple flood events in France and India and a winter storm in Australia last year were not modeled, although each caused more than $700,000 in insured losses.