Group 8
2021-12-22

White Paper: Parametric Cyclone Cover

Over the past 50 years, 1,942 disasters have been attributed to tropical cyclones. This has tragically resulted in 779,324 deaths and led to nearly $1.5 trillion USD in economic losses. Taken on average, that’s 43 deaths and $78 million USD in damages due to cyclones every day. While the loss of human life has decreased significantly as a result of improved forecasts, the average cost of cyclone-driven damages has risen sharply. Industries most affected include: agriculture, construction, tourism and renewable energy.

At the global level, tropical cyclones have been the costliest natural disaster in terms of material damage and economic losses in the last two decades. For example, in 2020 alone, cyclone-driven economic loss was estimated to have reached $78 billion USD worldwide. Of these $78 billion USD in losses, 68% ($53 billion USD) were not covered by insurance. Even in the more established North American market, 2021’s Hurricane Ida, illustrates the windstorm coverage gap. Hurricane Ida carried an economic impact of an estimated $95 billion USD with only $30 billion USD or 32% of losses insured.

The rising sum of insured losses exacerbates the protection gap and underline the role of parametric cyclone cover in building resilience against corporate and public sector wind exposure.

Over the past 50 years, 1,942 disasters have been attributed to tropical cyclones. This has tragically resulted in 779,324 deaths and led to nearly $1.5 trillion USD in economic losses. Taken on average, that’s 43 deaths and $78 million USD in damages due to cyclones every day. While the loss of human life has decreased significantly as a result of improved forecasts, the average cost of cyclone-driven damages has risen sharply. Industries most affected include: agriculture, construction, tourism and renewable energy.

At the global level, tropical cyclones have been the costliest natural disaster in terms of material damage and economic losses in the last two decades. For example, in 2020 alone, cyclone-driven economic loss was estimated to have reached $78 billion USD worldwide. Of these $78 billion USD in losses, 68% ($53 billion USD) were not covered by insurance. Even in the more established North American market, 2021’s Hurricane Ida, illustrates the windstorm coverage gap. Hurricane Ida carried an economic impact of an estimated $95 billion USD with only $30 billion USD or 32% of losses insured.

The rising sum of insured losses exacerbates the protection gap and underline the role of parametric cyclone cover in building resilience against corporate and public sector wind exposure.