Integrated actions needed to build resilience against frequent and forceful natural catastrophes amidst climate change
In 2017, Swiss Re counted 183 natural catastrophes and 118 man-made disasters across the globe. That's more than 300 in total. In Asia, economic losses for last year amounted to USD 31 billion, of which 84% was uninsured. This gap is widening as we can expect natural catastrophes to impact our societies at a higher frequency and impact due to climate change. Just over the last few months, several disasters have hit Asia. Shortly after Typhoon Jebi in Japan, Typhoon Mangkhut swept across the Philippines, Hong Kong, Macau to Southern China. In September, the combined effects of the earthquake and tsunami in Sulawesi, Indonesia, led to the destruction of over 70,000 homes and loss of 2,000 lives.
A region most exposed to natural disasters, Asia's total assets lost to disasters since 1970 amounts to USD1.3 trillion to-date and the United Nations' 2017 APAC Disaster Report predicts that 40% of worldwide economic losses in 2020 to 2030 due to natural disasters will occur in the region. As Asia continues to grow and develop denser cities, our societies will become more vulnerable to extreme natural events and the impact they bring. Clearly, there is an urgent need to provide protection, helping people, business and societies to strengthen resilience against natural catastrophes and recover quickly.
Across the region, we have seen much progress as governments proactively seek collaborative initiatives to cope with the financial impact of disasters. The Philippines partners with World Bank and the insurance industry to provide emergency funding to those provinces most exposed to typhoons; China provinces enter risk transfer arrangements to protect farmers and the wider population against floods; and ASEAN is working on the implementation of a cross-country disaster risk financing scheme.
While commendable, relying solely on such initiatives and state relief is insufficient. As an industry, we can support taking on more risks, to develop products which fit better to people's modern lives, and to protect assets all around the world to enable economies to bounce back in the time of loss. Leveraging today's technology to tap on deep knowledge built on years of data is key to model and price risks accurately, enabling development of adequate coverage for future events.
Parametric solutions are an excellent example that utilizes technology, data and risk knowledge to provide coverage where traditional indemnity-based insurance are found inadequate. Distributing solutions using the latest technology helps us to attract customers from a new generation with simple products which relate directly to those customers' needs. Triggering automated claims payments based on a pre-defined set of indices, parametric solutions can provide earthquake or typhoon coverage, helping people to recover quickly and get back on their feet.
Resilience is not a cost – it is an investment into our future. It needs strength in partnerships and an integrated effort among insurers, reinsurers, partners, governments and consumers to close the gap. At Swiss Re, we believe that great things happen together. Working hand-in-hand, we can stay close, stay relevant and get ahead in insuring our changing world.
Category: Climate/natural disasters: Climate change, Disaster risk, Earthquakes, Floods/storms, Resilience