Insurers paid $50 billion in natural disaster claims in 2016

That’s the highest cost since 2012, according to reinsurance company Munich Re.

A woman braves the wind on the waterfront of Victoria Habour as Typhoon Haima approaches Hong Kong, Friday, Oct. 21, 2016. CREDIT: AP Photo/Vincent Yu
A woman braves the wind on the waterfront of Victoria Habour as Typhoon Haima approaches Hong Kong, Friday, Oct. 21, 2016. CREDIT: AP Photo/Vincent Yu

Altogether, natural disasters cost $175 billion in 2016 — and insurers paid around $50 billion in natural disaster-related insurance claims, the highest amount since 2012, according to an annual report by reinsurance company Munich Re.

Not all of the damage was weather-related. Two earthquakes in Japan cost the most of any disaster all year — $31 billion, only $6 billion of which was covered by insurance. But floods in China in June and July were the second costliest natural disaster of the year, incurring damages of $20 billion. And Hurricane Matthew — which blew through the Caribbean and the eastern United States in early October — was the third costliest disaster, causing losses of $10.2 billion. Flooding and intensified storms have both been tied to climate change.

In general, North America saw an unusually high number of natural disasters in 2016, more than any other year since 1980.

In many cases, only a small fraction of the costs associated with a natural disaster were covered by insurance. In China, for instance, only 2 percent of the losses from natural disasters in 2016 were insured.

Despite the high cost of these disasters, 2016 saw the second-lowest number of fatalities from natural disasters in 30 years — 8,700 globally. That’s well below the 10-year average of 60,600 fatalities from natural disasters annually.

“Losses in a single year are obviously random and cannot be seen as a trend,” Munich Re board member Torsten Jeworrek told Reuters. “The high percentage of uninsured losses, especially in emerging markets and developing countries, remains a concern.”

While natural disasters from a single year can hardly be seen as a trend, insurance companies have warned that climate change will likely exacerbate existing vulnerabilities to natural disasters. In 2015, a coalition of insurance companies, consumer groups, and environmental advocates released a report urging the United States to rethink its approach to natural disasters, arguing that current policy places too much emphasis on responding to disasters rather than mitigating damage from disasters in the first place. In 2014, Farmers Insurance Co. sued local governments in the Chicago area for failing to prepare for climate change, though those lawsuits were later dropped.

The costs of natural disasters are just one more piece of the economic argument for climate action. It’s likely that as climate change worsens and global temperatures increase, storms, especially around the mid-latitudes, could become more powerful, resulting in greater and more costly damage. Sea level rise, too, means more storm surge and puts coastlines at risk.

A report released in November by the United Nations Development Program found that holding the world to 1.5° C (2.7° F) of warming could save the global economy as much as $12 trillion by 2050. That’s because warming of only 1.5° C would lessen the chance of widespread crop failures, reduce the magnitude of coral reef die-offs, and limit the number of heat waves suffered each year. But it would also require the massive deployment of renewable energy on a global scale — a shift that would create an estimated 68 percent increase in jobs related to installing, operating, and maintaining low-carbon energy infrastructure.