Hurricane Sandy, drought cost U.S. $100 billion

Doyle Rice, USA TODAY | USATODAY

The U.S. had the world's top two costliest natural disasters in 2012, according to a report released Thursday by global reinsurance firm Aon Benfield, based in London.

The largest global disasters of 2012 were Hurricane Sandy (with a cost of $65 billion) and the year-long Midwest/Plains drought ($35 billion), according to the company's Annual Global Climate and Catastrophe Report, which was prepared by Aon Benfield's Impact Forecasting division.

The $35 billion figure is one of the first estimates of the U.S. drought cost, which "comes from a combination of anticipated losses sustained by the agricultural sector and other factors such as business interruption," says Aon Benfield meteorologist and senior scientist Steve Bowen.

Sandy and the drought accounted for nearly half of the world's economic losses but, owing to higher levels of insurance coverage in the U.S., 67% of insured losses globally, the report states. Total economic losses include the entire cost of an event, while insured losses are the amount of economic losses that are covered by insurance, says Bowen.

The U.S. alone accounted for nearly 90% of all the world's insured losses in 2012. In addition to the drought and Sandy, several severe weather events and Hurricane Isaac contributed to this total.

The U.S. typically represents 64% of the insured losses. Why does the U.S. percentage tend to be so high each year? "From an insurance perspective, the United States has generally been the dominant region of the world for costliest natural disaster events," Bowen says. "The U.S. has a higher level of insurance penetration than most countries, which in turn leads to more of the economic losses being covered."

Global natural disasters in 2012 combined to cause economic losses of $200 billion, which is just above the 10- year average of $187 billion. There were 295 separate events, compared to an average of 257.

A report in October 2012 from Munich Re, the world's largest reinsurance firm, said that climate change was driving the increase in natural disasters since 1980, and predicted that those influences will continue in years ahead.

However, the Aon Benfield report states: "Despite growing support for 'the new normal' theory of a world dominated by rapidly escalating global catastrophe losses, our study highlights that 2012 returned to a more normal level of losses after the extreme economic and insured losses of 2011." That was the year of the terrible earthquake and tsunami in Japan, an earthquake in New Zealand, and floods and landslides in Thailand.

The report goes on to say that while nominal catastrophe losses are increasing at an alarming rate, economic losses as a percent of global GDP – a measure normalized for inflation and economic development – has remained relatively stable over the past 30 years.

The deadliest event of 2012 was Super Typhoon Bopha, which left more than 1,900 people dead after making landfall in the Philippines in December. The number of human fatalities caused by natural disasters in 2012 was approximately 8,800, with nine of the top 10 events occurring outside of the U.S.