From earthquakes along the Ring of Fire to landfalling category 5 typhoons, countries in the Asia-Pacific region of the world are among the most exposed to natural catastrophes. In the last 50 years, more than USD 1.3 trillion dollars have been lost due to disasters. With insurance penetration only at 8%, the protection gap looms large, and the costs of these events fall onto the backs of the governments and their citizens, stunting or reversing years of economic growth.
And this is before taking into account the potential impact of climate change on the Asia-Pacific region; according to the United Nations (UN), due to the development of many low-lying nations vulnerable to sea level rise, annual average losses from natural disasters could reach 0.6% of the region's GDP by 2030. To put it mildly, current, business-as-usual disaster risk management strategies that have been employed by governments to date won't be sufficient.
However, the conversation around disaster risk management is starting to shift, and the countries in the Asia-Pacific region are poised to be global leaders. Last week I participated on a panel hosted at the UN in New York by the Permanent Mission of Mongolia and UN's Economic and Social Commission for Asia and the Pacific (ESCAP). The session bought together members of the public sector and the insurance industry to discuss the financial instruments and technology available to governments to assist them in developing a holistic, robust disaster risk management strategy.
Government representatives from all parts of the Asia-Pacific region, from Iran in the west to the Philippines in the east, were in attendance. While there remains much work to be done, it was clear that the government officials in attendance understood that insurance is a key component of disaster risk financing, and that everyone, from individual citizens to supra-sovereign risk pools, can benefit from including insurance in their financial toolbox.
Bhutan's government is taking a holistic approach to disaster risk reduction, exploring insurance solutions to cover
their critical hydropower infrastructure and considering a government-based fund to subsidize insurance purchases by low income farmers. In Iran, 2% of the budget goes to national risk reduction measures. The ambassador from Samoa spoke of the benefits the Pacific Catastrophe Risk Insurance Company (formerly the Pacific Catastrophe Risk and Financing Initiative), and how the funds received by member states after Cyclones Ian, Pam and Gita have played a key role in the recovery.
The representative from the Philippines, so devastated by Typhoon Haiyan in 2013, spoke of how her country recently purchased parametric insurance cover to protect exposed local government units against typhoons and earthquakes, but that the recent purchase is only one part of their disaster
risk recovery efforts. In areas recovering from Haiyan, this is a focus not just on rebuilding, but on building
The Asia-Pacific region has some of the fastest growingeconomies in the world; the ESCAP event served as an excellent reminder that as these economies continue to expand, and natural disasters continue to occur, they will look to the insurance industry as both a partner and a mentor in developing sustainable and responsible disaster risk management strategies.
Category: Climate/natural disasters: Climate change, Disaster risk, Drought, Earthquakes, Floods/storms, Resilience
Location: New York, NY, USA