No organisation today can hope to operate without being covered by an appropriate level of business insurance. Providing invaluable financial aid when an incident – whether natural or man-made – strikes, insurance helps organisations of all shapes and sizes stay on their stride.
Natural disasters, such as those that often frequent Australia during the seasonal extremes of the year, typically cause the costliest damage – with companies usually powerless to prevent them damaging their business. A new report shows that while the total insured losses due to natural catastrophe worldwide remains high, this figure has dropped significantly in recent years.
The insight comes from the 2014 Annual Global Climate and Catastrophe Report by Impact Forecasting, a subsidiary of advisory firm Aon Benfield. According to the report, natural disaster insurance losses reached a five-year low in 2014.
Total combined insured losses reached USD$39 billion last year – a figure that is 38 per cent below the decade average of $63 billion.
The difference is especially stark given that last year was not necessarily a quieter year in terms of natural catastrophes. A total of 258 separate natural disasters around the world were collectively responsible for the losses, the report outlines, which is only two fewer than the 10-year average of 260.
"Global insured property catastrophes accounted for 8.6 per cent of global property premium in 2014, compared to a ten-year average of 13.9 per cent," added Stephen Mildenhall, chief executive officer at Aon Analytics.
"The secular increase in catastrophe losses since 1980, which is broadly in-line with global GDP, continues to be an engine of growth for the insurance industry."
Business insurance critical – wherever in the world you are
Aon's report highlights yet another surprising statistic – the level of insured losses in a region does not necessarily correspond with how many natural disasters the area encountered. For instance, the report found that while three-quarters of natural disaster losses last year occurred outside the United States, the country claimed more than half (53 per cent) of global insured losses.
This can be attributed to "relatively high insurance penetration" in the US, according to Aon.
With cyclones and other extreme weather events common in Australia at this time of the year, now's a good opportunity to review your business insurance package, seeing whether it will provide cover for whatever Mother Nature throws at your company.