2021 Weather, Climate and Catastrophe Report

Organisations, governments and communities are beginning to realise that our interconnected world is becoming more directly — and indirectly — affected by the environment around us.

Examining global natural hazards helps quantify and qualify how climate change, socioeconomics, and other emerging issues are driving new types of risk.

In New Zealand, 2021 delivered 10 catastrophe events and an aggregate insured loss of NZD $322.5m. This aggregate loss was well above the long-term average for New Zealand (excluding earthquake) of NZD $70m. Looking back over the last decade, 2021 was well above the average of NZD $180m.

In fact, 2021 was the costliest insured loss year for New Zealand on record since 1968 (for weather perils). Five out of the top six insured loss years (since 1968) have occurred in the last five years with the great majority coming from storms and related flooding.

The most significant event of 2021 was the west coast floods from July. The upper South Island was hit with persistent, heavy rainfall from a strong cold front lying across the region from 16-18 July 2021. Rainfall totals were over 300mm in 24 hours at many recording stations across the region. One station in the Hokitika catchment recorded 622 mm in 42 hours. This reading at Cropp Waterfall is equivalent to over half of Auckland’s annual rainfall total.

The persistent heavy rainfall caused widespread flooding across the Buller region including the town of Westport where over 600 homes were evacuated. Significant residential property damage across Westport was observed. The Buller River at Longford reached 1200 cumecs on 17 July 2021. This flow into Westport was approximately equivalent to the 50-year return period (two per cent annual probability).

As with Australia, local climate projections highlight an increased intensity of extreme rainfall in future decades, with significant regional variability. Translating these rainfall projections into flooding impacts remains a highly uncertain exercise. Natural variability in the climate system is expected to control future insured losses from weather events over the next decade.

Quantification and Catastrophe Modelling
The development of frameworks to achieve the most comprehensive quantification of the changes in all atmospheric risks due to climate change possible, will provide insurers with a more informed degree of risk management as well as an established and sound forum for discussion, with all stakeholders to achieve a sustainable market in the future.

It is widely accepted that catastrophe models are the best available tools to tackle quantification issues. Disciplines like model development, model evaluation, calibration and validation are becoming more and more relevant as modelling tools increase their complexity, in order to reduce the uncertainty around climate change impact.

The world is becoming more volatile and uncertain, leading investors and regulators towards increasing their requirements for more disclosure of the climate-related impacts on businesses.
The (re)insurance sector, with its deep knowledge of catastrophe risk, has the possibility of tackling this challenging topic from an angle of growth and opportunity, increasing transparency with customers and developing products on the primary side to leverage new solutions to hedge some of that risk.

The Importance of Resilience
Insured losses caused by some natural hazards can be reduced through improving the resilience of the built environment. As only a proportion of the built environment is exposed to bushfires, floods or typhoons and cyclones, this ‘at-risk’ proportion can be focused on for improvement.

Cost-effective resilience measures for other severe weather perils such as thunderstorms (hail) and common synoptic storms (low pressure systems) that can impact anywhere remain a challenge.

The insurance industry is well placed to promote education and awareness across the community of extreme weather risk, associated costs and measures to improve resilience.
 
For more insights on an Asia Pacific scale, Aon's 2021 Weather, Climate and Catastrophe Report: Asia Pacific Regional Insights is available for download now.

For more insights on a global scale, Aon’s 2021 Weather, Climate and Catastrophe Insight report, is also available now.
 

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