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Greater Insurability of Climate Risk: Key Insights from Aon's 2025 Report

Aon plc, a top global professional services firm, recently released its 2025 Climate and Catastrophe Insight report, shedding light on the catastrophic losses associated with climate risks. The findings are particularly alarming, revealing that an astounding 60% of the economic damages caused by disasters in 2024 were uninsured. This situation underscores the pressing need for enhanced insurance coverage against climate-related catastrophes.

According to the report, global economic losses from natural disasters soared to $368 billion in 2024. This figure reflects a slight decrease from $397 billion in 2023 but still represents an alarming trend. A significant portion of these losses was attributed to hurricanes and severe storms, particularly in the United States, which bore the brunt of the financial toll. CEO Greg Case has emphasized that the severity of climate risks demands immediate and innovative solutions to mitigate the growing impact of extreme weather.

The report charts several concerning trends about natural catastrophe losses. Notably, weather-related disasters are becoming not only more frequent but also more financially devastating. In 2024, insured losses climbed to $145 billion, which is 54% higher than the average for the 21st century. However, this still leaves a stark protection gap – a staggering 60% of the economic damage remains uninsured, reflecting significant vulnerabilities for communities, businesses, and governments.

Among the catastrophic events, Hurricane Helene emerged as the most costly global event, resulting in $75 billion in damages and tragically claiming 243 lives. Following closely, Hurricane Milton recorded $35 billion in losses. Remarkably, the U.S. accounted for 78% of total global insured losses, highlighting the urgent need for a more comprehensive risk management strategy in high-risk areas, which continue to see increased population and economic activity.

The report also confirmed that 2024 was the hottest year on record, with a notable rise in temperatures across 20 countries. This culminated in an era marked by severely escalating global temperatures and harsh weather patterns. The consequences of these extreme conditions are evident, as 18,100 lives were lost due to natural hazards, primarily heatwaves and flooding. This number, however, is significantly better than the 21st-century average of 72,400, attributing some success to advancements in early warning systems, effective forecasts, and comprehensive evacuation plans.

Aon's report highlights the critical need for investment in technological analysis and modeling to effectively address and price these risks. As Case pointed out, capital investment will gravitate toward regions that demonstrate adequate protection against these looming threats. Hence, rallying support for innovative insurance products and forging public-private partnerships remains essential for enhancing global economic resilience.

Economic recovery amidst such loss will undoubtedly require collaboration between various sectors. Andy Marcell, CEO of Risk Capital at Aon, noted the insurance industry’s crucial role in protecting vulnerable communities by generating new sources of capital, thereby creating stronger economic foundations.

In a detailed examination, the top ten global economic loss events of 2024 were identified, showing a trend of escalating financial woes resulting from natural disasters. The data collected illuminates the factors behind rising economic losses, pointing to a need for more proactive measures in risk preparedness and resilience.

As communities continue to navigate the challenges posed by climate risk, the insights derived from Aon’s report serve as a critical reminder of the importance of insurability against natural disasters. While understanding of natural hazards has advanced significantly, the stark reality remains – large-scale financial disasters are becoming increasingly prevalent. To combat this trend, both businesses and communities must equip themselves with the insights derived from reliable climate data and forecasting models.

For more detailed insights, the full report can be accessed here and provides a comprehensive overview of catastrophe trends and their implications for the global economy.