• In Australia, 2021 delivered six catastrophe events covering a bushfire, two floods, a severe thunderstorm, a tropical cyclone and an earthquake.
  • The aggregated insurance loss across 2021 was AUD $2.16 billion. Only 43 percent of these losses were covered by insurance, highlighting a clear and significant climate risk protection gap.
  • Modelling tools can help to quantify and qualify climate change impact.
Download 2021 Weather, Climate and Catastrophe APAC Insights

Organisations, governments and communities are beginning to realise that our interconnected world is becoming more directly — and indirectly — affected by the environment around us.

Examining global natural hazards helps quantify and qualify how climate change, socioeconomics, and other emerging issues are driving new types of risk.

In Australia, 2021 delivered six catastrophe events covering a bushfire, two floods, a severe thunderstorm, a tropical cyclone and an earthquake. The activity through 2021 clearly highlights the variety of natural hazards that Australia is exposed to with none of this activity out of the ordinary.

The aggregated insurance loss across 2021 (AUD $2.16b) was slightly above the long-term average of AUD $1.84b (if looking back to 1967). Referring to the last decade, 2021 was slightly below the average of AUD $2.31b

However, it is concerning to note that last year, the protection gap – which is the portion of economic losses that are not covered by insurance – was 57 per cent, rising from around 30 per cent in 2020. In Australia alone, natural catastrophes have averaged nearly AUD $2.69 billion in annual insured losses dating to 2010

The range of perils producing losses in 2021 was wider than 2020. These perils such as bushfire, floods and cyclone have greater underinsurance associated with them when compared to perils such as hailstorms, which dominated the 2020 losses. It is for this reason the 2021 protection gap was greater when compared to the previous year.

One of the more widespread and significant declared catastrophe events was the March 2021 floods. On 18 March 2021, a low-pressure trough formed along the eastern seaboard of Australia, causing intense and prolonged rainfall and flooding across south-east QLD, coastal and inland NSW and parts of Victoria. The trough was extensive, covering 1200 km of north-south length. This type of weather pattern is not uncommon for the time of year, but there were two main factors that contributed to the heightened flood risk. The first was that this event occurred at the end of a wetter-than-usual summer period driven in part by La Niña. The second was the stationarity of this event, with heavy rain persisting for four to five days.

The highest rain volumes were experienced on the NSW mid-north coast (~ 500 years return period) and north-west (~ 300 years return period) regions.[4] The largest seven-day rain total was at Bellwood, Nambucca Heads, where over a metre of rain was recorded, exceeding the 2000-year return period level.

Flood levels recorded at river gauges did not, in general, equate to the comparably extreme rainfall. Return period flood depths at Taree, on the mid-north coast, were around the 100-year level, whereas every other flood affected area was below the 50-year level, and in most cases the 10 to 20-year level. As of February 2022, aggregate insured loss from this event sits at AUD $0.6b[5].

Local climate projections generally highlight an increased intensity of extreme rainfall in future decades, with significant regional variability.[6] Translating these rainfall projections into flooding impacts remains highly uncertain as many other variables that control flood risk also need careful consideration. Natural variability in the climate system is expected to control future insured losses from weather events over the next decade.

Projected changes to the frequency of extreme weather events that cause extreme rainfall (and subsequent flooding) and changes in catchment infiltration capacity (urbanisation and antecedent conditions) need careful consideration when forming a view on any future change in flooding impacts.


The development of frameworks to achieve the most comprehensive quantification of the changes in all atmospheric risks due to climate change possible, will provide insurers with a more informed degree of risk management as well as an established and sound forum for discussion, with all stakeholders to achieve a sustainable market in the future.

It is widely accepted that catastrophe models are the best available tools to tackle quantification issues. Disciplines like model development, model evaluation, calibration and validation are becoming more and more relevant as modelling tools increase their complexity, in order to reduce the uncertainty around climate change impact.

The world is becoming more volatile and uncertain, leading investors and regulators towards increasing their requirements for more disclosure of the climate-related impacts on businesses.

The (re)insurance sector, with its deep knowledge of catastrophe risk, has the possibility of tackling this challenging topic from an angle of growth and opportunity, increasing transparency with customers and developing products on the primary side to leverage new solutions to hedge some of that risk.


Insured losses caused by some natural hazards can be reduced through improving the resilience of the built environment. As only a proportion of the built environment is exposed to bushfires, floods or typhoons and cyclones, this ‘at-risk’ proportion can be focused on for improvement.

Cost-effective resilience measures for other severe weather perils such as thunderstorms (hail) and common synoptic storms (low pressure systems) that can impact anywhere remain a challenge.

The insurance industry is well placed to promote education and awareness across the community of extreme weather risk, associated costs and measures to improve resilience.


For more insights on an Asia Pacific scale, Aon’s 2021 Weather, Climate and Catastrophe Report: Asia Pacific Regional Insights is available for download now.

Download 2021 Weather, Climate and Catastrophe APAC Insights


For more insights on a global scale, Aon’s 2021 Weather, Climate and Catastrophe Insight report is also available now.

Download 2021 Weather, Climate and Catastrophe Global Insights



[1] ICA’s Insurance Catastrophe Resilience Report: 2020-21

[2] Aon’s 2021 Weather, Climate and Catastrophe Insight report

[3] Insurance Council of Australia’s historical catastrophe list (Jan 2022) and Aon data

[4] Return period estimates from the Australian Rainfall and Runoff, ARR, IFD data, 2016

[5] ICA’s Insurance Catastrophe Resilience Report: 2020-21

[6] BoM, CSIRO

Want to keep up to date with our insights?

Privacy Policy