The global aggregate average annual loss (AAL) and exceedance probability loss metrics for 2018 include results from three new models introduced this year (European severe thunderstorm, and Southeast European earthquake and flood), and reflect changes in risk as a result of updated models (European extratropical cyclone and U.S. Wildfire); they also include updates to AIR’s industry exposure databases for Europe, and the U.S.
“After a decade of below-average losses (apart from 2011 and 2017), 2018 will reinforce the fact that preparing for large losses before they occur is critical to continued solvency and resilience,” said Rob Newbold, executive vice president, AIR Worldwide.
Discussed in this year’s report are global economic losses from catastrophes, which can vastly exceed insured losses depending on the region and peril. This "protection gap"—the difference between economic and insured losses—highlights the significant burden that society faces when a disaster strikes. In September, Typhoon Mangkhut illustrated very well the difference between well-developed insurance markets and those that were less so, after hitting the Philippines, mainland China, Hong Kong, and Macau. And the impact of an earthquake and tsunami on Indonesia brought the protection gap into stark relief.
Newbold concluded, “For the insurance industry, the protection gap can spur innovation in product development. In the public sector, governments are recognizing the importance of moving from reactive to proactive risk management, especially in countries where the risk is well known and a risk transfer system is not well established. Understanding the protection gap can help governments assess the risks to their citizens and critical infrastructure, and develop risk-informed emergency management, hazard mitigation, and public risk financing strategies to enhance global resilience and reduce the ultimate costs.”
The 2018 Global Exceedance Probability report also includes a breakdown of contribution to global AAL by region and peril and key aggregate EP metrics by region.
Download the report here: http://airww.co/GlobalEP2018
About AIR Worldwide
AIR Worldwide (AIR) provides risk modeling solutions that make individuals, businesses, and society more resilient to extreme events. In 1987, AIR Worldwide founded the catastrophe modeling industry and today models the risk from natural catastrophes, terrorism, pandemics, casualty catastrophes, and cyber incidents. Insurance, reinsurance, financial, corporate, and government clients rely on AIR’s advanced science, software, and consulting services for catastrophe risk management, insurance-linked securities, longevity modeling, site-specific engineering analyses, and agricultural risk management. AIR Worldwide, a Verisk (Nasdaq:VRSK) business, is headquartered in Boston, with additional offices in North America, Europe, and Asia. For more information, please visit www.air-worldwide.com.