2020 proved to be one of the most challenging years in modern history. Following an above-average number of natural catastrophes with significant humanitarian and financial impacts, coupled with the most prolific global pandemic since 1918, the world heads into 2021 with numerous questions to be answered.
While 2020 was not a record-setter in terms of financial losses deriving from natural disasters, there were several notable records set on a regional, peril or event-level scale. The most widespread and newsworthy events in 2020 were recorded in the United States. During a record-setting Atlantic Hurricane Season with 30 named storms, 13 hurricanes, and 6 major hurricanes, the U.S. mainland saw 12 of those named storms (including six hurricanes) make landfall. Both of those U.S. landfall statistics set new records for the country dating to the mid-1800s. While hurricanes dominated most headlines, the costliest U.S. peril was severe convective storm (SCS). The peril surpassed 2011 as the costliest severe weather season on record, previously considered the benchmark year for SCS, and was led by the historic derecho that swept across the Midwest on August 10. Wildfires in the Western U.S. also prompted a new modern era record for acres burned and the third-highest annual peril payouts for insurers on record (only behind 2017 and 2018).
While re/insurers faced a challenging year in the United States, it was a different story for the rest of the world. Aggregate payouts outside the U.S. were diminished. However, the fiscal analysis is only a small part of the broader story. Prolific rainfall in parts of south Asia left some of the worst monsoon season flooding in years (notably in China, Japan, India, and South Korea). Multiple hailstorms struck major metro areas in Australia. Drought conditions ravaged parts of South America.
Europe endured its costliest winter windstorm in nearly a decade. Several African nations cited high casualties following major flooding. These events occurred within the broader realm of COVID-19, and resulted in major challenges from a relief and recovery standpoint.
COVID-19’s coinciding impact to natural disaster response from a humanitarian perspective was enormous. World organizations such as the United Nations (UN) pleaded for financial support and volunteers to help people in need. The insurance industry was faced with enormous challenges in trying to accelerate the claims process while balancing multiple large-scale disasters, pending litigation from COVID-19-related incidents, increased replacement costs due to a disrupted supply chain, and other complex scenarios. However, the re/insurance industry managed to weather the storm successfully as continued strong capitalization allowed all disasters to be comfortably managed where cover was in place.
Perhaps the biggest takeaway from 2020 was the recognition of how concurrent events can have major global implications. These “compounded” or “connected extremes” will provide critical learning opportunities for better planning as the world becomes increasingly complex and faces growing or emerging risks. 2020 also highlighted topics such as the protection gap to address the underserved, increasingly vulnerable populations, the need for additional investment around risk mitigation strategies to navigate new forms of volatility, and the growing influence from climate change on daily life.