Weather, Climate & Catastrophe Insight

Transcription

1 Aon Benfield Weather, Climate & Catastrophe Insight 17 Annual Report

2 Table of Contents Executive Summary: 17 s Natural Disaster Events Natural Disaster Events & Loss Trends... Global Economic Losses.... Global Insured Losses....6 Global Fatalities Natural Disasters Defined & Total Events Natural Peril Review Tropical Cyclone....1 Severe Weather Wildfire... Earthquake... Other Perils Climate Review... Global Temperature, ENSO... Global Carbon Dioxide....6 Arctic Sea Ice Global Catastrophe Review.... United States.... Americas (Non-U.S.).... EMEA (Europe, Middle East, and Africa)....1 APAC (Asia and Oceania)...7 About Impact Forecasting... About Aon Benfield.... Contacts... Weather, Climate & Catastrophe Insight 17 Annual Report

3 Executive Summary 17: Costliest year on record for weather disasters Insurance industry in position to handle high volume of claims payouts USD billion USD 1 billion USD +16 % billion USD 1 billion +9 % Economic cost of natural disasters in 17; second-costliest year on record Insured cost of natural disasters in 17; second-costliest year on record Costliest year ever recorded for weather disasters Costliest year for insurers for weather disasters Percentage of how much higher 17 economic losses vs. -16 average Percentage of how much higher 17 insured losses vs. -16 average USD billion Economic cost of hurricanes Harvey, Irma, and Maria 6 % Percentage of 17 global economic damage from Harvey, Irma, and Maria USD 6 billion Amount of available capital by global reinsurers at the end of Q 17; industry well suited to handle the volume of claims payouts in % of catastrophe losses occured in the continental United States 6 % of insured catastrophe losses occurred in the continental United States USD 8 billion Insured cost of hurricanes Harvey, Irma, and Maria 6 % Percentage of 17 global insurance payouts from Harvey, Irma, and Maria Third warmest year on record dating to 188 for combined land and ocean temperatures 1 1 billion-dollar events 16 in the United States billion-dollar insured events 11 in the United States USD billion Second-costliest year on record for insurers with the severe weather peril USD 1 billion Costliest year on record for insurers with the wildfire peril Individual events 1,11+ Highest casualty disaster of 17 (Mudslide in Sierra Leone) Along with this report, we continue to welcome users to access current and historical natural catastrophe data and event analysis on Impact Forecasting s Catastrophe Insight website: Aon Benfield 1

4 17 Natural Disaster Events & Loss Trends Global Economic Losses Exhibit 1: Top 1 Global Economic Loss Events Date(s) Event Location Deaths Economic Loss (USD) Insured Loss (USD) Aug. Sept. Hurricane Harvey United States 9 ~1 billion ~ billion September 18- Hurricane Maria Caribbean Islands Hundreds+ ~6 billion ~7 billion September -1 Hurricane Irma U.S., Caribbean Islands 1 ~ billion ~ billion October Wildfires United States 1 billion 11 billion Summer Flooding China billion million Summer & Autumn Drought Southern Europe N/A 6.6 billion 7 million September 19 Earthquake Mexico 7. billion 1 billion July Flooding China 7. billion 1 million August - Typhoon Hato China. billion million May 8-11 Severe Weather United States. billion.6 billion All Other Events 9 billion 8 billion Totals billion 1 1 billion 1, Exhibit : Significant 17 Economic Loss Events California Wildfires 1 billion Hurricane Harvey 1 billion Hurricane Irma billion Hurricane Maria 6 billion > 1, M > 1, M 1 Subject to change as loss estimates are further developed Includes losses sustained by private insurers and government-sponsored programs Based on events that incurred economic loss greater than USD million. Position of an event is determined by the most affected administrative unit or epicenter Weather, Climate & Catastrophe Insight 17 Annual Report

5 Economic losses arising from natural disasters in 17 were among the highest ever recorded on a nominal, inflation-adjusted, and normalized basis. The USD billion total was just the second year on record to ever surpass USD billion on an inflation-adjusted basis, joining 11 with losses of USD86 billion. In terms of economic losses resulting solely from weather disasters, 17 became the costliest year ever recorded at USDbillion. This was higher than the USD9 billion incurred in. The predominant driver of damage in 17 resulted from one of the costliest Atlantic hurricane seasons on record following the landfalls of Hurricanes Harvey, Irma, and Maria that left extensive damage across parts of the United States and the Caribbean Islands. Those three storms alone caused an estimated USD billion in damage and represented 6 percent of 17 s annual economic loss. Other significant events during the year included the most destructive wildfire outbreak ever recorded in the state of California in the United States. The October outbreak caused nearly USD1 billion in economic damage across Northern California s Napa Valley region and was followed by another billion-dollar wildfire outbreak in Southern California in December. Elsewhere, substantial summer flooding caused more than USD1 billion in damage across China, the majority of which occurred throughout the Yangtze River basin. Southern Europe endured an extended drought during the summer and autumn months that caused USD6.6 billion in damage across parts of Spain, Italy, and Portugal. In Mexico, two powerful earthquakes struck during September that led to nearly USD6 billion in combined economic loss. This included major damage across the Mexico City metro region on the nd anniversary of its historic 198 tremor. Total economic losses were 9 percent above the to 16 average of USD18 billion on an inflation-adjusted basis. Damage losses were an even more significant 16 percent higher than the median of USD18 billion. Economic losses from all natural disasters have annually trended upward by. percent above inflation since 198 and an even more robust.9 percent since. Weather-only damage has annually trended upward by. percent above the rate of inflation since 198 and upward by. percent since. Exhibit : Global Economic Losses All natural disasters 86 Weather only USD Billions (17) USD Billions (17) Nominal: Damage cost at the time of occurrence Inflation-Adjusted: Nominal loss adjusted to today's dollars using the U.S. Consumer Price Index Normalized: Hypothetical damage cost if a historical event occurred today with current wealth, population and exposure Aon Benfield

6 For the first time since 1, the tropical cyclone peril was the costliest of the year at USD billion. It represented 66 percent of the global tally and was led by landfalling hurricanes in the Atlantic Ocean Basin. Other perils that registered aggregated damage costs in excess of USD billion were severe weather (USD6 billion) and flooding (USD billion). It's worth noting that the severe weather peril had its costliest year since 11, flooding had its lowest year since 9, and the wildfire peril had its costliest year in decades. Exhibit : Global Economic Losses by Peril 17 Average (-16) Median (-16) USD Billions (17) Tropical Cyclone 6 Severe Weather Flooding Wildfire Drought Earthquake Winter Weather 1 EU Windstorm Other There have only been six individual quarters on record that have caused more than USD1 billion in inflation-adjusted economic damage, five of which have occurred since the turn of the 1st century. The third quarter of 17 was the second-costliest quarter ever registered at USD61 billion due to catastrophic damage caused by a trio of major hurricanes and flooding across Asia. It was far behind first quarter 11, which was dominated by the Tohoku Earthquake & Tsunami and other seismic and hydrologic events in Oceania. Exhibit : Costliest Quarters by Economic Loss 7 USD Billions (17) Q1 11 Q 17 Q Q1 199 Q 8 Q Tohoku Earthquake & Tsunami New Zealand Earthquake Australia Flooding Hurricane Harvey Hurricane Maria Hurricane Irma Hurricane Katrina Hurricane Rita Hurricane Dennis Kobe Earthquake Western/Central EU Floods California Floods China Floods Mississippi River Floods (US) Cyclone Nargis Hurricane Ivan Hurricane Charley Hurricane Frances Weather, Climate & Catastrophe Insight 17 Annual Report

7 There were 1 individual billion-dollar natural disaster events in 17, which is above the average of 7 individual events dating to, but lower than the 6 individual events in 16. The United States led with 16 individual events (just behind the record 17 in 11), while APAC was second with 8, the Americas was third with, and EMEA was fourth with. In terms of weather-only billion-dollar events in 17, there were 9 individual events, which is above the average of dating back to and individual events below the 1 registered in 16. The United States led with 16 individual events (just shy of the 17 recorded in 11), APAC was second with 8, while the Americas and EMEA both experienced. (Please note that Hurricane Irma was a billion-dollar event for the United States mainland and the Caribbean Islands. For this analysis, it was counted for both regions, but classified as a singular event for the final global tally.) Exhibit 6: Global Billion-Dollar Economic Loss Events All natural disasters Weather only United States APAC EMEA Americas 7 9 United States APAC EMEA Americas 1 1 Events Events Note: Exhibit 6 includes events that reached the billion-dollar (USD) threshold after being adjusted for inflation based on the 17 U.S. Consumer Price Index. Aon Benfield

8 Global Insured Losses Exhibit 7: Top 1 Global Insured Loss Events Date(s) Event Location Deaths Economic Loss (USD) Insured Loss (USD) Aug. Sept. Hurricane Harvey United States 9 ~1 billion ~ billion September 18- Hurricane Maria Caribbean Islands Hundreds+ ~6 billion ~7 billion September -1 Hurricane Irma U.S., Caribbean Islands 1 ~ billion ~ billion October Wildfires United States 1 billion 11 billion May 8-11 Severe Weather United States. billion.6 billion December Wildfires United States. billion. billion March 6-8 Severe Weather United States.6 billion. billion Spring & Summer Drought United States. billion 1.9 billion March 6-1 Severe Weather United States. billion 1.6 billion June 11 Severe Weather United States. billion 1.6 billion All Other Events 1 billion 1 billion Totals billion 1 billion, Exhibit 8: Significant 17 Insured Loss Events 6 California Wildfires 11 billion California Wildfires 11 billion Hurricane Harvey billion Hurricane Harvey billion Hurricane Irma Hurricane billion Irma billion Hurricane Maria Hurricane 7 billion Maria 7 billion Insured Loss Insured Loss 1-1, M 1-1, > 1, M M > 1, M Subject to change as loss estimates are further developed Includes losses sustained by private insurers and government-sponsored programs 6 Based on events that incurred insured loss greater than USD1 million. Position of an event is determined by the most affected administrative unit or epicenter 6 Weather, Climate & Catastrophe Insight 17 Annual Report

9 Insured losses from natural disasters in 17 were among the costliest ever incurred by the insurance industry. This includes payouts by private insurers and public entities such as the National Flood Insurance Program or the Risk Management Agency s Crop Insurance Program in the United States. The USD1 billion in payouts were the second-highest on the inflation-adjusted record, just behind 11 (USD17 billion) and slightly above (USD19 billion). The year marked just the third time that insured losses from natural catastrophes had surpassed USD1 billion on a nominal or inflation-adjusted basis. In terms of insured losses resulting solely from weather disasters, 17 slightly surpassed as the most expensive year ever recorded at USD1 billion for the industry. It is worth noting that the insurance industry was well positioned to handle the cost of the 17 disasters. Global reinsurer capital was a record USD6 billion at the end of third quarter 17. This is a broad measure to detail how much capital insurers had available to trade risk, and also ensured that both insurers and reinsurers were capable to withstand the extensive losses during the year. Additionally, the industry was in a much better position to handle a high catastrophe loss year in 17 as opposed to and 11. For more details, please see Aon Benfield s Reinsurance Market Outlook. The vast majority of insurance payments came from three hurricane events: Harvey, Irma, and Maria. Those three storms cost the industry an estimated USD8 billion alone, which was equivalent to 6 percent of all losses from 17. Given these tropical cyclone events, the severe weather (convective storm) peril was not the costliest peril for insurers for the first time since 1. Outside of Harvey, Irma, and Maria which each required insurance payouts in excess of USD billion the most significant event was the outbreak of October wildfires in Northern California. Total fires payouts from that event cost the industry at least USD11 billion. Nine of the ten costliest insured loss events in 17 impacted the continental United States, including four that were severe weather-related. The costliest severe weather outbreak was registered from May 8-11 that included the most expensive hail event on record in the greater Denver, Colorado metro region. Beyond the U.S. and the Caribbean, the most notable event was the September 19 Mexico earthquake and Cyclone Debbie in Australia. At USD1. billion, Debbie became the second-costliest event on record for the local industry. Total insured losses were a remarkable 16 percent above the to 16 average (USD1 billion) on an inflation-adjusted basis. Payouts were an even more significant 1 percent higher than the median at USD billion. Insured losses from all natural disasters have annually trended upward by 7.1 percent above inflation since 198 and. percent since. Weather-only damage has annually trended upward by 7. percent above the rate of inflation since 198 and upward by.7 percent since. Exhibit 9: Global Insured Losses All natural disasters 16 Weather only USD Billions (17) USD Billions (17) Aon Benfield 7

10 For the first time since 1, the tropical cyclone peril was the costliest of the year at USD8 billion. It represented 6 percent of the global tally. Other perils that registered aggregated damage costs in excess of USD1 billion were severe weather (USD billion) and wildfire (USD1 billion). Wildfire payouts were by far the highest ever recorded in a single year. Severe weather, which references convective storms, has been the costliest peril for insurers for 1 of the prior 18 years, which highlights its annual consistency. Tropical cyclone is prone to more annual volatility, though can often prompt significantly higher payouts. Exhibit 1: Global Insured Losses by Peril Average (-16) Median (-16) 7 USD Billions (17) Tropical Cyclone 1 1 Severe Weather Wildfire 8 7 Flooding Drought 1 EU Windstorm 1 Earthquake 1 Winter Weather Other There have only been three individual quarters on record that have caused more than USD billion in inflation-adjusted insurance payouts from natural disasters and just eight that topped USD billion. The third quarter of 17 at USD88 billion was the secondcostliest quarter ever registered due to catastrophic damage caused by a trio of major hurricanes. It was second only to third quarter, which was led by Hurricanes Katrina and Rita, as well as multi-billion-dollar flooding in Europe. Prior to, only two quarters passed the USD billion threshold: third quarter 199 with Hurricane Andrew and first quarter 199 with the Northridge Earthquake. Exhibit 11: Costliest Quarters by Insured Loss 1 USD Billions (17) Q Q 17 Q 11 Q Q 11 Q Q 199 Q1 199 Hurricane Katrina Hurricane Rita Central Europe Floods Hurricane Harvey Hurricane Maria Hurricane Irma Tohoku Earthquake & Tsunami New Zealand Earthquake Australia Floods Hurricane Ivan Hurricane Charley Hurricane Frances U.S. Severe Weather Hurricane Sandy Hurricane Andrew Northridge U.S. Drought Earthquake New Zealand Earthquake 8 Weather, Climate & Catastrophe Insight 17 Annual Report

11 There were 1 individual billion-dollar natural disaster events in 17, which is well above the average of 9 dating to. It was higher than the 1 registered in 16 and the second highest number of billion-dollar events for the insurance industry (1 in 11). The United States led with 11 individual events, while the Americas were second with and APAC had 1. For the first time since 6, EMEA did not record any such event. In terms of weather-only billion-dollar events, there were 1 individual billion-dollar weather events in 17, which was well above the average of 8 dating to. This was the second-greatest number of events, only behind 18 events in 11 but higher than 1 events in 16. The United States led with 11 events, while the Americas and APAC followed with and 1 respectively. EMEA did not record any such event. (Please note that Hurricane Irma was a billion-dollar event for the United States mainland and the Caribbean Islands. For this analysis, it was counted for both regions, but classified as a singular event for the final global tally.) Exhibit 1: Global Billion-Dollar Insured Loss Events All natural disasters Weather only United States APAC EMEA Americas United States APAC EMEA Americas 1 18 Events Events Note: Exhibit 1 includes events that reached the billion-dollar (USD) threshold after being adjusted for inflation based on the 17 U.S. Consumer Price Index. Aon Benfield 9

12 The Evolution of Claims Handling Post-Harvey, Irma, & Maria Mitch Balter Executive Managing Director-Client Operations, Aon Benfield The Americas experienced one of its most active years in recent history due to the concoction of hurricanes, earthquakes, and wildfires. These events truly demonstrated the value of reinsurance with paid claims in an average of eight days to augment the recovery process. As soon as an event happens, this is a critical time for the reinsurance industry when brokers, catastrophe modelers, and reinsurers come together to support insurers and in turn their customers. But the last two quarters of 17 triggered an evolution in claims procedures and lessons to be learned for the future. What was unique? Discussions with reinsurers about potential pre-funding of paid losses without formal proof of loss reports were a prominent theme as all parties sought to help families and businesses as quickly as possible. Almost all markets were able to pre-fund losses in the lower layers of catastrophe programs. However, it was necessary to receive periodic reports on actual and projected payments from clients to help facilitate pre-funding on higher layers. This was the first time that collateral markets were challenged with a notable volume of claims activity. Most funds are based on full limits and could efficiently pay claims. However, the funds based on full limits less outstanding premium, most of which were started at June and July with little time to accrue, found that collateral posted was exhausted quickly and actions were needed to obtain additional payments. Markets engaged with ecommerce solutions, such as ACCORD, received client information immediately and were able to respond quickly to enhance the settlement process. There were many variables that arose for each of the catastrophic events, including the hours clause, flood versus wind damage with Hurricane Harvey, for example and aggregation challenges. The California wildfires 168-hour clause highlighted the issues raised around when the burning started and ended and whether the individual fires counted as one event or several. Letter of Credit season was very late with a short window for clients to report and reinsurers to respond with their levels of liability highlighting the importance of effective communications. Due to the number and close timing of the events, loss adjusters were challenged to meet the needs of insurers. As a result, loss adjustment expenses were higher than anticipated and insurers experienced delays in receiving reports. Lessons learned Wording issues that arose will need to be addressed during renewals. Enhanced contract wording for collateral markets to ensure funds can be paid in a timely fashion without delay. Many variables arose for each catastrophe, including around the hours clause during the wildfires, flood versus wind damage for Hurricane Harvey, and aggregation challenges. The California wildfires 168-hour clause highlighted the issues raised around when the burning started and ended and whether the individual fires counted as one event or several. 1 Weather, Climate & Catastrophe Insight 17 Annual Report

13 Global Fatalities Exhibit 1: Top 1 Human Fatality Events Date(s) Event Location Deaths Economic Loss (USD) August Flooding Sierra Leone ~1,11 million August Flooding India 9 million September 18- Hurricane Maria Caribbean Islands Hundreds+ ~6 billion November 1 Earthquake Iran, Iraq 6 7 million March & April Flooding Colombia Millions September 19 Earthquake Mexico 7. billion December Typhoon Tembin Philippines, Vietnam million May Flooding Sri Lanka million Summer & Autumn Flooding Zimbabwe 71 million August Flooding Democratic Republic of the Congo N/A All Other Events ~,7 8 billion Totals ~1, billion Exhibit 1: Global Human Fatalities Number of Fatalities Average (-16),,,,8 6,898 9,87 The number of human fatalities caused by natural disasters in 17 was approximately 1,. Nearly half of the top ten events occurred on the Asian continent, many of which were spawned by significant inundation and landslides in India, Sri Lanka, Nepal, and Bangladesh. However, the deadliest event was a massive landslide in Sierra Leone that left more than 1,1 people dead. Overall, the flood peril accounted for more than 6 percent of fatalities during the year. Fatalities, 1, 1,, 1,1 1,18 1,69 11,618 1,8,99,6 9,8,9 8,781 1,1 8,11 19, 8, 1, Typhoon Tembin was officially the deadliest tropical cyclone of the year, though there remained substantial uncertainty surrounding the official death toll from Hurricane Maria in Puerto Rico. Tentative estimates listed the death toll likely in the hundreds, while other unofficial estimates indicated the toll could have been beyond 1,. The third-deadliest peril was earthquake, which accounted for 1 percent of the annual human fatalities total. Significant tremors near the Iraq and Iran border and in Mexico each caused hundreds of fatalities. 17 saw a higher number of natural disaster-related fatalities from those sustained in 16 (8,) and was a substantial 86 percent lower than the average since (71,). The tally was also well below the median number fatalities of approximately,. Aon Benfield 11

14 Natural Disasters Defined & Total Events An event must meet at least one of the following criteria to be classified as a natural disaster: Economic Loss: USD million Insured Loss: USD million Fatalities: 1 Injured: Homes / Structures Damaged or Filed Claims:, Based on the noted criteria, there were at least individual natural disaster events in 17, which was percent higher than the -16 average of 7. As typically expected, the second and third quarters were the most active with 87 and 11 events occurring, respectively. APAC incurred the highest number of events, which is expected given Asia s expansive landmass and susceptibility to natural disaster events. All regions of the globe with the exception of the Americas registered an above average number of events. Exhibit 1: Total Natural Disaster Events Total Events Average (-16) Events Exhibit 16: Total Natural Disaster Events by Region Average (-16) Events APAC EMEA United States Americas 1 Weather, Climate & Catastrophe Insight 17 Annual Report

15 17 Natural Peril Review Peril Focus: Tropical Cyclone In 17, tropical cyclones generated economic losses of USD billion making it the costliest year on record for the peril since, which had USD7 billion in registered losses. Hurricane Katrina in remains the costliest tropical cyclone with economic losses of USD16 billion in today's dollars. 17 was also the costliest insured loss year on record since with losses generated by the peril reaching at least USD8 billion. Insured losses generated in of USD11 billion (17 USD) remain the highest on record for the peril during a calendar year. Hurricane Katrina also remains the costliest tropical cyclone on record in terms of insured losses at USD8 billion. Economic losses due to tropical cyclones totaled were 96 percent higher than the -16 average of USD7 billion. The vast majority of the losses were incurred in the United States mainland (USD1 billion), followed by the Americas and Caribbean (USD9 billion), APAC (USD1 billion), and EMEA (USD67 million). It was the costliest peril of the year in terms of both economic and insured losses. Global Activity The overall number of global tropical cyclones was below average in 17. Prior to any final reanalysis, there were 8 confirmed named storms that developed across all global basins. This was slightly lower than the long-term 7-year average of 86 named storms. There were hurricanes, typhoons, and cyclones (storms with sustained wind speeds of at least 7 mph or 119 kph), which was 11 percent below the long-term average of 7 and the lowest annual total since 11. The number of major storms (Saffir-Simpson Hurricane Wind Scale rating of Category,, or with sustained wind speeds of at least 111 mph or 179 kph) was 19, or below the long-term average of and the lowest number of such storms since 9. In terms of global landfalls, 19 storms came ashore at Category 1 strength or above. Six of those made landfall at Category strength or above. Landfall averages from include 16 Category 1+ and Category + events. Three of the Category + storm landfalls were in the Atlantic Ocean Basin, while two were recorded in the Southern Hemisphere (including the South Indian and South Pacific Ocean basins) and one in the Western Pacific Ocean Basin. All official tropical cyclone data comes via the U.S. National Hurricane Center (NHC) and the Joint Typhoon Warning Center (JTWC). Exhibit 17: Global Tropical Cyclone Activity 1 Major Hurricanes Hurricanes Named Storms Tropical Cyclones Aon Benfield 1

16 Exhibit 18: Global Tropical Cyclone Landfalls Hurricanes Major Hurricanes Tropical Cyclones A different measure used to gauge the activity of individual tropical cyclones and tropical cyclone seasons is Accumulated Cyclone Energy (ACE). ACE for an individual tropical cyclone is calculated by adding together the squares of the (estimated) maximum wind speed for the storm from the time it is named (i.e. maximum wind speeds are mph (6 kph) or higher) for every six-hour period until it dissipates. The total number is then divided by 1, in order to give a more manageable figure. For an entire cyclone season, ACE is calculated by summing the totals for each individual storm. The square of the maximum wind speed is used, as this is proportional to kinetic energy, so by adding the squares of the wind speeds together, a measure of accumulated energy is acquired. On average, more than one-third of global accumulated cyclone energy is record in the Northwest Pacific Basin. Slightly less than one-fifth is recorded in both the South Indian Ocean and Northeast and Central Pacific Basins. The Atlantic Basin generally contributes 1 percent. The South Pacific Basin on average amounts to slightly less than 1 percent of the global total, while the North Indian Basin accounts for the remaining few percent. 1 Weather, Climate & Catastrophe Insight 17 Annual Report

17 Exhibit 19: Global Accumulated Cyclone Energy 1, Accumulated Cyclone Energy Average (197-16) 1, Accumulated Cyclone Energy 1, & Colorado State University Global ACE in 17 was 9.8, or 86 percent of the recent 1-year average of 68. It was also substantially lower than the long-term average from of Additionally, it was lower than 16 s total of 789. and substantially lower than 1 s total of 1,69. which was the highest recorded since The record year for ACE was 199 when a value of 1,197.9 was recorded. Only the Atlantic Basin recorded higher than average ACE during 17, contributing 8 percent of the global total, compared to an average of approximately 1 percent, primarily due to the formation and longevity of Hurricanes Irma and Maria. All other basins recorded lower than average values of ACE. Aon Benfield 1

18 Atlantic Ocean Basin Losses generated by the Tropical Cyclone peril during 17 were almost entirely driven by the trio of Atlantic Hurricanes known as HIM: Harvey, Irma, and Maria. Collectively they generated economic losses of USD billion during a six-week period from mid-august through the end of September. Costliest was Hurricane Harvey with economic losses of USD1 billion, largely incurred in the state of Texas, followed by Hurricane Maria, whose main impacts were felt in Dominica and Puerto Rico among other Caribbean nations, which generated economic losses of USD6 billion. The third-costliest hurricane of the Atlantic season was Hurricane Irma, which cost USD billion as it wrought havoc across the Caribbean and the US Southeast with a particular focus on Florida. The same three hurricanes additionally accounted for 9 percent of the total tropical cyclone losses generated in 17. Hurricanes Harvey, Irma, and Maria generated combined insured losses of USD8 billion out of a total of more than USD8 billion generated globally throughout the year. The costliest of the Atlantic hurricanes for the public and private insurers was Harvey, with losses of USD billion, followed by Maria and Irma at USD7 billion and USD billion, respectively. Exhibit : Landfalling Tropical Cyclones in the Atlantic Basin during 17 Harvey Katia Nate Franklin Irma Tropical Disturbance Tropical Low / Wave Tropical Disturbance Tropical Depression Tropical Low / Wave Tropical Storm Tropical Category Depression 1 Tropical Category Storm Category 1 Category Category Category Category Category Category Maria & NHC 16 Weather, Climate & Catastrophe Insight 17 Annual Report

19 Pacific & Indian Ocean Basins Away from the Atlantic Basin, the other major basins around the globe were relatively quiet in terms of overall activity. Other notable tropical cyclones during 17 included August s Typhoon Hato, which caused USD. billion worth of damage in China and Hong Kong, and March s Cyclone Debbie that triggered extensive flooding in eastern Australia leading to economic losses of USD. billion. Typhoon Hato s landfall was followed within a matter of days by the arrival of Tropical Storm Pakhar in the same area, which exacerbated flooding in the affected areas. Cyclone Debbie was the second costliest cyclone on record in Australia in terms of both economic and insured losses as it generated claims amounting to USD1. billion. Only 11 s Cyclone Yasi cost the country more with economic losses of USD. billion (17) and insured losses of USD1.6 billion (17 USD). Two other tropical cyclones generated economic losses in excess of USD1 billion during 17: October s Typhoon Lan and November s Typhoon Damrey. The majority of the damage inflicted by Lan (USD1.1 billion) was noted in Japan while Vietnam bore the brunt of Damrey (USD1. billion). Lan was one of five named storms to impact Japan during 17: the others were July s Tropical Storm Nanmadol and Typhoon Noru, September s Typhoon Talim, and October s Typhoon Saola. Economic losses collectively amounted to USD.1 billion. Insurance payouts covered approximately percent of these losses (USD1. billion). Vietnam endured its most active year since 199 in terms of landfalling tropical cyclones with a Category (November s Typhoon Damrey) and a Category (September s Typhoon Doksuri) storm making landfall there. Collectively the storms claimed more than 1 lives, damaged almost, homes, and prompted economic losses of USD1. billion. The Philippines saw an active end to the year with Tropical Storm Kai Tak and Typhoon Tembin impacting southern portions of the country. The storms collectively claimed more than lives and caused damage to more than 7, homes. Economic losses were estimated at USD million. Aon Benfield 17

20 Peril Focus: Severe Weather The severe weather peril which references severe convective storms was again one of the leading causes of damage around the globe. Economic losses due to severe weather totaled nearly USD6 billion during 17, above the ten-year average of USD8 billion (17). The vast majority of the losses were incurred in the United States (USD billion), followed by EMEA (USD. billion), APAC (USD billion), and the Americas (USD8 million). It was the second costliest peril of the year in terms of economic losses, following tropical cyclone. As typically the case given its unique topography and geographic location that makes it particularly prone to severe weather outbreaks, the United States was the most active region of the globe for the peril. The U.S. alone endured nine separate events that caused economic damage of at least USD1 billion. Six of those events cost insurers at least USD1 billion highlighting the continued financial toll of the peril. While the largest tropical cyclone events often dwarf costs from the largest severe weather events, the severe weather peril has much more annual consistency in aggregated loss cost. Tropical cyclone is much more volatile on an annual basis. The costliest 17 severe weather event was an outbreak that struck the United States Rockies, Plains, and Midwest for four days during May that caused economic losses of USD. billion. At least USD.6 billion of that total was covered by insurance. The vast majority of the damage was hail-related and impacted the greater Denver metropolitan region. Hail was the primary driver of the loss in 17, which included billion-dollar payouts following events that affected major metro areas such as Denver, Colorado; Dallas, Texas; and Minneapolis, Minneapolis. Overall, severe weather outbreaks cost the United States roughly USD billion during 17, with most of the damage occurring to the east of the Rocky Mountains. It is worth noting that thunderstorm-related damage losses in the U.S. were the second-highest ever registered on an inflation-adjusted basis, second only to 11. Despite 17 ending as one of the top most active years for tornado touchdowns, it ended with fewer than strong tornadoes (F/EF+), just the second time since 19 that this has occurred. The other time was in 1987 (1). This highlights how hail and straight-line wind is often the predominant driver of thunderstorm losses, and not tornado. Elsewhere notable severe weather outbreaks impacted portions of Europe, Australia, South Africa, China, and Canada. None of the non-u.s. severe weather outbreaks generated economic losses in the vicinity of USD1 billion; the costliest non-u.s. event was a four-day outbreak in late June and early July that affected parts of Germany and generated insured losses in excess of USD7 million. A further two-day severe weather outbreak during August caused economic losses of USD77 million across Central Europe, particularly Poland. That event was led by an extended line of fast-moving damaging winds (known as a derecho ), which caused major damage to the local timber industry. 18 Weather, Climate & Catastrophe Insight 17 Annual Report

21 Hail Hail is the predominant driver of thunderstorm-related loss in the United States and elsewhere around the world. While tornadoes often receive most media coverage given their immense damage to structures in the immediate path, the largest-sized tornadoes (around 1 mile or 1.6 kilometers) are much smaller than the widest hail swaths which can be several miles (kilometers) wide and travel across dozens of miles. The impact of hailstones can leave severe damage to homes, businesses, vehicles and agriculture. Annual insured hail losses in the United States during the past decade alone are now estimated to average as high as USD1 billion, which is more than half of the total SCS-related cost. Since the implementation of Doppler radar in the early 199s and the continued improvement of storm reporting and social awareness, the number of large hail events has shown a. percent annual rate of growth in the United States. Large hail is defined by NOAA s Storm Prediction Center as any hailstone of at least inches (.1 centimeters) in diameter. As more people continue to move into high-risk areas for severe thunderstorms, it is anticipated that future storm-related losses will further increase in the coming years. The combination of more people, more exposure, and more frequent large-hail events are ingredients for this to be true. Hail is not just a primary threat to the United States. While most billion-dollar events occur in the United States, damage costs running well into the hundreds of millions (USD) or higher are recorded with regularity in parts of Europe, Asia, and Africa. Particularly prone locations include Germany, France, Belgium, The Netherlands, Italy, Australia, Canada, China, India, Kenya, and South Africa. Exhibit 1: U.S. Hail Reports (" & Larger) 1, 1,79 1, Source: NOAA Aon Benfield 19

22 Peril Focus: Wildfire The wildfire peril had its costliest year on record for the insurance industry in 17, with global losses nearing USD1 billion. Overall economic losses were even higher at more than USD1 billion. 17 was marked by two major outbreaks in California that led to the destruction of more than 1, structures alone. The October event in Northern California left at least people dead and 18 others injured around the Napa Valley region. Total economic losses were estimated around USD1 billion of which USD11 billion was insured. This was by far the costliest wildfire outbreak ever recorded for the industry. A separate major outbreak impacted Southern California in December that cost insurers in excess of USD.1 billion. Further wildfires throughout California and the Western United States during the summer and early autumn months prompted economic losses in excess of USD. billion. Europe recorded the largest extent of land burned by wildfires on satellite record, which dates back to 198. For the first time in measurement history, fires consumed more than one million hectares of land across Europe. The worst affected country was Portugal where two significant outbreaks in June and October caused a combined death toll of 111, the highest on record. Economic losses due to wildfires totaled almost USD1. billion and the local insurance sector declared the 17 fires the costliest natural disaster in the country s history with payouts exceeding USD9 million. It is worth noting that wildfires burned a remarkable 6.1 percent of Portuguese national territory in 17. Exhibit : Wildfire Extents in California and Portugal Nuns Nuns Tubbs Atlas Tubbs Atlas California Nevada Nevada California Thomas Thomas Burned areas Urban areas Burned areas Urban areas Source: GeoMAC, EFFIS & Aon Benfield Weather, Climate & Catastrophe Insight 17 Annual Report

23 The third largest extent of land burned by wildfire in at least half a century was recorded in the United States in 17. California, one of the largest annual contributors, accounted for nearly 1 percent; however the vast majority of the nationwide financial impact was concentrated in the Golden State. This was due to destructive fires that impacted densely populated regions, including Sonoma, Napa, and Mendocino Counties in Northern California. The Thomas Fire that impacted Southern California became the largest Californian fire in modern history. Among the notable causes of this year s outbreaks were strong Santa Ana winds and prolonged drought conditions. The scope of the national tragedy in Portugal was marked by historical records being broken in terms of fatalities, financial impact, and areas burned. Unlike the other four major southern European countries, Portugal fails to mitigate the impact of wildfires in the long term. According to data from EFFIS, Portugal annually accounted for nearly 1 percent of land burned by wildfires in the European Union in the 198s, percent in the 199s, 9 percent in the s and the country s share averages at nearly percent since 1. This trend can be attributed to several interacting factors, including Portugal s position in the path of strong Atlantic winds, rising temperatures and prolonged droughts due to a warming climate and ineffective strategies in fire mitigation. Among the most prominent factors is widespread planting of eucalyptus trees. Although being very important for the local paper industry, it is generally considered being highly flammable. Exhibit : Wildfire Acres Burned (United States & the European Union) 1 United States California. European Union Portugal 1. Acres Burned (Millions) 8 6 Acres Burned (Millions) Source: NFIC & Aon Benfield Source: EFFIS & Aon Benfield Elsewhere in 17, wildfires of note occurred in central Chile during January and February. South Africa recorded the costliest insurance event in history, when the Knysna fires in June destroyed hundreds of homes and payouts reached USD7 million. Multiple summer fire events in Canada s British Columbia left a combined economic cost of nearly USD million. Aon Benfield 1

24 Peril Focus: Earthquake Earthquakes generated more than USD8. billion in economic Elsewhere, a devastating earthquake struck the Iran-Iraq border losses during 17, more than half which were incurred in Mexico region on November 1 that claimed at least 6 lives. It was (USD.8 billion) from separate events that occurred within a week the year s deadliest temblor and generated economic losses of of each other. The year s largest tremor, measured by the United USD7 million. Other notable earthquakes struck China s Sichuan States Geological Survey (USGS) at magnitude 8., struck offshore and Xinjiang provinces in August and May respectively, Italy s Mexico s Chiapas state on September 7 and caused widespread Abruzzo region on January 18, and the Greek island of Kos on destruction throughout several southern states with economic July 1. All of the earthquakes were responsible for multiple losses of USD1. billion. The year s costliest earthquake, which casualties and each individually generated economic losses was also the sixth largest in terms of magnitude (7.1), struck of more than USD1 million. Mexico s Puebla state on September 19. It was also on the nd anniversary of the historic 198 event that left more than 1, dead in Mexico City. The tremor caused extensive damage throughout Puebla and several surrounding states, including in Mexico City. Economic losses were cited at USD. billion and insured losses were roughly USD1 billion. Exhibit : Global Earthquake Activity in 17 Magnitude. -.9 Magnitude > Focus Depth (km) > 8. Shallow (< 7) Intermediate Focus Depth (km) (7 - ) Deep (>) Shallow (< 7) Intermediate (7 - ) Deep (>) Source: USGS & Aon Benfield Weather, Climate & Catastrophe Insight 17 Annual Report Nearly all of the economic and insured losses resulting from earthquakes in 17 were incurred in Mexico, Asia, and Europe. Damage costs were well below the -16 average of nearly USD9 billion, but closer to the median of USD1 billion.

25 Peril Focus: Other Perils Windstorm ranked as the costliest peril for European insurers in 17 with an overall loss just above USD. billion. A total of 1 storms made notable impact in 17, i.e. incurred at least USD million of insured losses. Although the number of such storms is at its highest since, the overall impact for insurers was still below the long-term average due to a lack of a truly major storm. Multi-billion dollar events can occur in otherwise inactive seasons, for instance, Windstorm Kyrill in 7. Relative unpredictability and variability creates a potential for new real-time modeling products. Among the most significant storms of 17 was Windstorm Herwart, which impacted Central Europe at the end of October 17, incurring approximately EUR million losses to German insurers and also becoming the second costliest windstorm on record in the Czech Republic. Similar impacts on the German market were felt after the passage of storm Egon in mid-january and Xavier in early October. Another notable event was Ex-Hurricane Ophelia, which impacted the British Isles in mid-october. Although the storm became the easternmost major Atlantic hurricane on record, resulting impact on the Irish and British insurance sector turned out to be lower than was initially feared. The most notable storms for French insurers were storm Zeus in early March and Ana in December. While a dichotomy in terms of physical effect, the drought and flood perils had notable impacts around the globe. While there were no individual events that surpassed USD1 billion in economic damage, there were at least six that had a multibillion-dollar financial cost. Most significantly, China registered a USD7. billion flood loss along the Yangtze River and Southern Europe cited agricultural damage at USD6.6 billion due to extended drought conditions. The costliest event of 17 in South America was a major flood following record rainfall in Peru during February and March that caused USD. billion in damage. Other costly drought events affected the United States and China each with USD. billion while Central and Northern Africa followed at USD1.9 billion. The winter weather peril was fairly benign in 17 as only two events had an economic cost beyond USD1. billion. One event impacted the Central and Eastern United States during the month of March with heavy snow, frigid temperatures and flooding. Europe endured a late season winter weather event in April as damage costs to the agricultural sector topped USD.1 billion. Aon Benfield

26 17 Climate Review 17 was the 1st consecutive year of above average global land and sea surface temperatures. Using official data provided by the National Centers for Environmental Information (NCEI) formerly known as the National Climatic Data Center (NCDC) combined land and ocean temperatures for the earth averaged +.8 C (+1.1 F) above the long-term mean, making 17 the thirdwarmest year ever recorded since official data on global temperatures began being collected in 188. This is notable because 17 became the hottest year on record that was not marked by El Niño conditions, which typically lead to warmer global temperatures. The hottest year on record was registered in 16 at +.9 C (+1.69 F) above average. The anomaly data is used in conjunction with NCEI s th century average of 191 to. The last below-average year for the globe occurred in 1976, when global temperatures registered.8 C (.1 F) below the long-term average. It is worth noting that all five of the warmest years dating to 188 have occurred since 1. Even more remarkable, 18 out of the 19 warmest years have been registered since 1 the lone exception being Analyzing global temperature anomaly trends is important to track changes in climate. A temperature anomaly is simply the difference of an absolute (measured) temperature versus its longer term average for that location and date. All major agencies that independently measure global temperatures use a combination of surface and satellite observations have each concluded that the Earth continues to get warmer. Some of these agencies include NOAA, NASA, the UK Met Office, and the Japan Meteorological Agency. More heat and moisture in the atmosphere leads to more unusual weather patterns and increases the risk of extreme events around the world. Exhibit : Global Land and Ocean Temperature Anomalies: Temperature Departure from Average ( C) Source: NOAA Weather, Climate & Catastrophe Insight 17 Annual Report

27 Exhibit 6: Phases of the El Niño/Southern Oscillation (ENSO) Neutral Conditions El Niño Conditions La Niña Conditions Source: NOAA Various ocean oscillations influence the amount of warming or cooling that takes place in a given year. The El Niño/Southern Oscillation (ENSO) is a warming or cooling cycle of the waters across the central and eastern Pacific, leading to a drastic change in the orientation of the upper atmospheric storm track. Warming periods are noted as El Niño cycles, while cooling periods are known as La Niña cycles. The Niño-. Index, which measures the temperature of the ocean waters in the central Pacific, is used to determine ENSO phases/cycles. According to data from the National Oceanic and Atmospheric Administration s (NOAA) Climate Prediction Center (CPC), 17 was a year initially marked by ENSO-neutral conditions after exiting a brief La Niña episode. Most of the year saw sea surface anomalies in the equatorial Pacific Ocean remaining between -. C and +. C; the threshold for ENSO-neutral conditions. By the end of the year, NOAA announced that La Niña conditions had begun and were expected to linger through the first three months of 18. After that time, the forecast models indicated a likelihood of ENSO-neutral conditions returning by the end of the Northern Hemisphere s spring months. Please note that in order to be considered in an ENSO phase, NOAA requires a five consecutive three-month running mean of sea surface temperature anomalies in the Niño-. Region to be +. C (El Niño) or -. C (La Niña). The exhibit below highlights NOAA-defined ENSO years. Exhibit 7: ENSO Years Since 19 (Red: El Niño / Blue: La Niña / Neutral: Gray) Source: NOAA Aon Benfield