A diverse range of natural disasters last year widened Australia’s protection gap and highlighted areas of underinsurance, while climate change is stepping up the importance of mitigation globally, Aon says.

Australia’s protection gap, reflecting the portion of economic losses not covered, rose to 57% compared with 30% in 2020 when hailstorms dominated losses.

Catastrophes last year included a bushfire, two floods, a severe thunderstorm, a tropical cyclone and the Victorian earthquake.

“These perils such as bushfire, flood and cyclone have greater underinsurance associated with them when compared to perils such as hailstorms,” Aon Head of APAC Analytics, Reinsurance Solutions Peter Cheesman said.

Aon’s Asia Pacific 2021 Weather, Climate and Catastrophe Insight report says the catastrophes led to aggregated insured losses of $2.16 billion, slightly above Australia’s long-term average of $1.84 billion, looking back to 1967. Annual natural catastrophe losses have averaged nearly $2.69 billion dating to 2010.

New Zealand experienced 10 catastrophe events and insured losses of $NZ322.5 million ($293.2 million) in the costliest year for weather perils on record since 1968.

Aon says local climate projections for Australia and New Zealand highlight an increased extreme rainfall intensity in future decades, with significant regional variability, but translating the projections into flooding impacts remains highly uncertain as other variables need consideration.

Asia Pacific economic losses dipped to $US78 billion ($110.1 billion) last year, 20% below the 2000-2020 average on an inflation-adjusted basis, partly reflecting a relatively quiet western Pacific cyclone season. Insurance covered just 12% of the APAC economic losses, the report says.

Last year was the world’s sixth-warmest year on record with land and ocean temperatures at 0.84 degrees Celsius above the 20th-century average.

Aon Meteorologist and Head of Catastrophe Insight Steve Bowen says many global communities are exposed to increasingly volatile weather conditions that are in part enhanced by the growing effects of climate change.

“We can no longer build or plan to meet the climate of yesterday. With physical damage loss costs rising, this is also leading to lingering global disruptions to supply chains and various humanitarian and other asset-related services,” he says.

“The path forward for organisations and governments must include sustainability and mitigation efforts to navigate and minimise risk as new forms of disaster-related volatility emerge.”