Aon: Natural disaster economic damage reaches €194bn in six months


New Aon report shows record number of large scale disasters in first half of 2023, with Turkey and Syria Earthquakes presenting big lessons. 

Aon, the global professional services firm, has published its Global Catastrophe Recap: First Half of 2023 reportOpens in a new tab, revealing a preliminary estimate of $194bn in economic losses stemming from global natural disasters. This is well above the first half year average of $128bn this century.

Earthquakes in Turkey and Syria during the first quarter of 2023 were responsible for nearly half of the total economic losses – estimated at $91bn. The event also became the deadliest global disaster since 2010 and the costliest in both countries’ modern histories. As a result, economic losses in the EMEA region were unprecedented at $111bn.

That event showed that regulation and enforcement of modern building codes are of critical importance to prevent material losses and fatalities. Despite relatively strict and modern building codes currently in place in Turkey, structural integrity and performance varied in the affected regions. Many of the collapsed buildings were built relatively recently, with newly built multi-story residential buildings suffering total collapses.

While those earthquakes represented the costliest natural disaster, severe convective storm activity in the United States was responsible for at least 13 individual billion-dollar events and $35bn in total preliminary insured losses, another January-June record.

Flooding in Italy and droughts in Brazil also both caused around $10bn in losses. Meanwhile, the north island of New Zealnd was hit by two billion-dollar disasters in three weeks. One was the effect of Cycline Gabriele, and the other was flooding in Aukland. 

Lessons to learn – uninsured risk and building codes

Billion-dollar natural disasters numbered 25 in six months and reconstruction is a natural focus in regions like southern Turkey. But the report from Aon warns that only 27% of natural disaster losses were covered by insurance. 

This insurance gap is a profound challenge. while most economic losses to storms in the USA were covered by insurance ($37bn insured compared to $47bn estimated economic damage) the situation with earthquakes is very different. Economic damage worth $92bn is not nearly matched by the mere $6bn of that covered by insurance.

At the same time, Earthquakes in particular saw modern buildings fail at alarming rates this year. Often, older buildings built before modern safety codes were introduced suffer disproportionate damage during natural disasters. In Turkey the perception is that the reverse proved true with many new-build apartment blocks collapsing entirely. 

Michal Lörinc, head of Catastrophe Insight at Aon, said: “Despite the reality that communities globally remain at risk to catastrophes, only about 27 percent of economic losses this year have been insured. These devastating events reinforce the importance of resilience and the mitigation of risk – such as enforcing building codes, which was highlighted by the Turkey and Syria earthquakes.”

Climate impact 

While no one natural disaster can be attributed to climate change, higher sea and atmospheric temperatures can lead to more severe weather and thus worsen the impact of natural disasters. Notable heatwaves have occurred worldwide this year, and the report notes that global sea surface temperature have been extremely high, with some areas experiencing water temperatures of up to 5˚Celsius higher than usual.

High global temperatures saw deadly heatwaves hit Argentina and Uruguay in February and March, while several rounds of extreme and prolonged heat have struck most of the countries in South-eastern Asia since April, according to the report. More recently, the most recent extreme heat hit multiple locations across North America, particularly northern Mexico and the southern United States, while a heatwave in Canada likely enhanced the worst wildfire season on record.

The report comes ahead of the Global Infrastructure Conference in September, where Aon will be debating with leaders from around the world, how digital technology can speed up decisions and delivery of infrastructure – which is particularly critical to reconstruction efforts following disasters both natural and man-made.