Global insurance losses from natural catastrophes in 2023 reached $118 billion, 31 per cent above the 21st-century average, a report by Aon has revealed.

Losses exceeded $100 billion for the fourth consecutive year.

According to the 2024 Climate and Catastrophe Insight report, global economic losses from natural catastrophes reached $380 billion in 2023, leaving a protection gap of 69 per cent, which the report said highlighted the urgency to expand insurance coverage.

Insurance covered $151 billion of total losses in 2022, leaving a protection gap of 58 per cent.

Aon said the report identified global natural disaster and climate trends to help make better decisions to manage volatility and enhance global resilience.

The report reveals that the $380 billion economic loss caused by 398 global natural disaster events was 22 per cent above the 21st-century average, driven by significant earthquakes and severe convective storms in the United States and Europe.

The number of large-loss natural-hazard events reached record levels in 2023, with $66 billion economic loss events and $37 billion insured loss events.

The report said earthquakes caused the most economic losses, while severe convective storms were most costly to insurers.

New Zealand, Italy, Greece, Slovenia and Croatia all recorded their costliest weather-related insurance events on record.

The report highlights that 95,000 people globally lost their lives due to natural hazards in 2023 — the highest number since 2010 — resulting largely from earthquakes and heat waves.

In terms of climate, 2023 was the hottest year on record with “unprecedented temperature anomalies”, and all-time highs observed in 24 countries and territories, the report said.

“Amidst increasing volatility and complexity, there is a significant opportunity for organisations to become more resilient to the climate and catastrophe risks highlighted in our report,” said Greg Case, the chief executive of Aon.

“By working across the private and public sector, we are accelerating innovation, protecting underserved communities and better addressing the economic impacts of extreme weather to create more sustainable outcomes for businesses and communities around the world.”

Andy Marcell, chief executive of risk capital and reinsurance at Aon, added: “The findings of the report highlight the need for organisations – from insurers to highly impacted sectors such as construction, agriculture and real estate – to utilise forward-looking diagnostics to help analyse climate trends and mitigate the risk, as well as protecting their own workforces.

“Risk managers can take advantage of increasingly sophisticated tools and leverage analytics to unlock capital and make better decisions. Equally, the insurance industry plays a critical role in improving the financial resilience of communities within their portfolios and taking the opportunity to bridge the protection gap with new and relevant products.”

With efforts to limit global warming, investors can consider climate change from three perspectives: protecting their portfolios against financial risks, benefiting from growth opportunities in climate solutions, and determining how to have a positive impact and play a role in a world moving to net-zero, the report said.

“The report highlights how communities can be vulnerable to disasters in different ways. For example, earthquakes in 2023 highlighted under insurance and the importance of regulation and enforcement of building codes,” said Michal Lörinc, head of catastrophe insight at Aon.

“In addition, deadly floods – notably in Libya and India – reinforce the necessity for proper maintenance of infrastructure while the Hawaii fires demonstrated the critical need for reliable warning systems and forecasting.”