Africa catastrophe: 2022 KwaZulu-Natal floods feature on the ‘$3 billion or higher’ economic losses table

Africa catastrophe: 2022 KwaZulu-Natal floods feature on the ‘$3 billion or higher’ economic losses table

The adverse impact of extreme weather events on African economies are illustrated in two reputable sources for natural catastrophe data. In its Q3 Global Catastrophe Recap report, Impact Forecasting, Aon’s catastrophe model development team revealed that insured losses from catastrophe events were set to exceed US$100bn for the third consecutive year. Aon reported estimated total economic losses from global natural catastrophe events at around US$227bn between January and end-September 2022.

Insurers and reinsurers based on the African continent will be studying the report findings anxiously, as the total estimated economic losses for the EMEA region came in at US$42bn in the nine months, well above average. Michal Lörinc, head of catastrophe insight in Aon’s Impact Forecasting team, said: “It is anticipated that there will be robust loss development across many of the reported natural catastrophes, especially with the realisation of costs associated with recent tropical cyclone development worldwide. Recurring La Niña conditions and the remainder of tropical cyclone seasons can potentially trigger impactful events through the rest of the year, with additional costs arising from inflationary pressure.”

Aon’s findings were echoed by global reinsurer Munich Re, which Africa Ahead reported on earlier this month. In Two severe weather events in Africa contributed to overall natural catastrophe figures, we describe how heavy monsoon rains in Nigeria in July 2022, and powerful low-pressure storms in South Africa in April 2022, contributed to significant economic and insured losses in those countries. Flooding in Nigeria saw more than 100,000 buildings and crops on more than 5,000 square kilometres of farmland destroyed, and more than 600 lives lost. Aon put the economic cost of the Nigeria floods at around US$300m, but the April floods in South Africa’s KwaZulu-Natal province, which claimed more than 400 lives, were estimated to have caused economic losses north of US$3bn.

“While the overall economic loss total was near the 21st-century average, aggregated insurance losses were set to notably exceed averages since both 2000 and 2012 and approach the average of the past five years,” noted Aon’s Impact Forecasting team. “These comparisons are highly dependent on the financial outcome of the impact of Hurricane Ian, which made landfall in the US at the end of September 2022.

“It can take months before the insurance and reinsurance claims data following such extreme weather events are fully collated, with Aon describing the slow data progression as being “standard and expected in the aftermath of larger-scale events”.

In a statement accompanying the Q3 update, the firm also explained how secondary perils such as severe convective storm and flooding had dominated losses in the first half of the year, whereas losses from primary perils accelerated in the third quarter due to tropical cyclone activity in the Atlantic and Western Pacific. They expect that Hurricane Ian will emerge as the costliest singular weather event for the year, and potentially one of the costliest insured loss events on record globally.

Even so, there is growing evidence that secondary rather than primary perils are driving natural catastrophe losses, with many reinsurers estimating that 60-70% of total insured losses belong under the ‘secondary perils’ category. Swiss Re, in its Sigma series, says that primary perils have the highest loss potential, are well monitored and usually covered by catastrophe models. By contrast, secondary perils generate small to medium losses, such as those caused by hail, storms and bushfires, and often have less mature modelling capabilities.

To further illustrate: much of the economic and insured damage following a hurricane, which is considered a primary peril, is actually caused by secondary perils such as hurricane-induced floods, hailstorms or tsunamis, to name a few. Swiss Re further identifies drought, thunderstorm, torrential rainfall and wildfire as secondary perils that are not adequately incorporated in reinsurers’ catastrophe models.

Returning to the impact of climate change on Africa, Ernst Rauch, chief climate scientist at Munich Re, commented: “Two factors should be kept in mind when considering the 2022 natural disaster figures. Firstly, we are experiencing La Niña conditions for the third year in a row. This increases the likelihood of hurricanes in North America, floods in Australia [and Southern Africa], drought and heatwaves in China, and heavier monsoon rains in parts of South Asia. At the same time, climate change is tending to increase weather extremes, with the result that the effects sometimes complement each other.”

COMMENTS

WORDPRESS: 0
DISQUS: 0
%d bloggers like this: