Currently showing: Climate/natural disasters

01 Apr 16 06:45

Total economic losses, and number of deaths, from disaster events in Asia have been higher than in any other region for three years
running. The biggest losses are typically natural catastrophe-related, as in the case of the earthquake that hit Nepal in April
last year, resulting in estimated total losses of  USD 6 billion in total, and claiming close to 9000 lives. In 2015, the explosions
at the Port of Tianjin in August – a "man-made" disaster – were another main contributor to the loss total.

According to sigma data, total losses from disaster events in Asia were USD 38 billion in 2015, down from USD52 billion in 2014 and USD 57 billion in 2013. The decline is not indicative of any trend. As a special chapter in the latest sigma shows, technology can help build resilience across the disaster risk-management value chain but ultimately, nature remains unpredictable and immensely powerful. Man cannot stop natural catastrophes from happening. And, as the Tianjin experience confirms, man made disasters are not impossible either.

There are recent examples of improved preparedness against disaster events in Asia. For instance, when Cyclone Hudhud, the biggest storm of the Pacific and Indian Ocean season in 2014 hit landfall in the Indian state of Andhra Pradesh, 68 people died. Early warning signals and evacuation of up to 400 000 people ahead of the storm saved many lives. Even so, total losses from Hudhud were estimated to be USD 7 billion. Perhaps more alarming, insured losses were just a fraction of that at USD0.6 billion.

And there's the rub. In Asia, disaster events happen frequently and often in areas where people are least able to protect themselves. For instance, indications are that the level of insurance cover for last year's earthquake in Nepal is just a fraction of the total losses. This is a recurring theme. Typhoon Haiyan in the Philippines in 2013 resulted in total losses of at least USD 5 billion and insured losses of less than USD 0.5 billion. In the same year, in eastern China Typhoon Fitow and subsequent flooding led to total losses of USD 10 billion and insured losses of USD 1.1billion.

The level of insured losses relative to total losses in Asia overall hovered at around 10% in 2013 and 2014, and rose to 19% in 2015. In Japan, the portion of covered losses tends to be higher, as one would expect from a developed nation. Thus, last year's Typhoon Goni generated total losses of USD 1.5 billion, of which about USD1.16 billion (77%) were insured. Sadly, the equivalent ratios for the aforementioned Hudhud (9%), Haiyan (less than 10%) and Fitow (11%) are more representative of the Asia norm.

In 2015, the proportion of insured losses (USD 7 billion) relative to total losses in Asia was higher than in the previous two years. Much of these – between USD 2.5 billion and 3.5 billion – can be attributed to claims resulting from the Tianjin explosions. The severity of the blasts and large asset exposures at the time – mainly cars parked at the port in transit – has made Tianjin the biggest man-made insurance loss event ever recorded in Asia. The losses are mostly from commercial claims.

More indicative of the imbalance in insurance management of human and commercial plight are the floods that paralyzed Thailand in 2011. These caused total losses of up to USD 30 billion, according to sigma numbers. Thailand is an important link in the global manufacturing supply chain and the floods triggered an estimated USD 12 billion in insured claims, mainly for damage to commercial properties and business interruption. There was scant cover for private distress. Flood insurance penetration for residential property and small business in Thailand was just 1%. Thousands of people were left homeless, and the livelihood of many were ruined as water inundated vast expanses of farmland and forced many small factories to close for a long time. A large protection gap remains a reality for many Asians.

Category: Climate/natural disasters

Location: Hong Kong


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