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05 Sep 13 14:21

A recent study by Swiss Re revealed that a 1 in a 100 year earthquake event today may cause a USD 12 bn loss to property and infrastructure assets in the city of Jakarta. However, only about USD 1 bn would be covered by insurance leaving a USD 11 bn gap in insurance protection. At the current growth rate of infrastructure and real estate investments as well as the increased concentration of property values due to urbanisation this gap may widen to USD 31 bn by the year 2023. For flood risk the protection gap for a 1 in a 100 year event is estimated to be around USD 25 bn by 2023 even when considering a gradual increase of insurance penetration.

In order to reduce this gap, zones of high hazard need to be identified (see also www.swissre.com/catnet), effective risk mitigation measures to be established and properly maintained, building codes enforced and applied as well as affordable and sustainable insurance solutions to be offered and implemented in collaboration with private and public partners. This will lead to stronger resilience of the society and economy in case of natural disasters. How else can our industry support this undertaking?


Category: Climate/natural disasters: Disaster risk, Earthquakes, Floods/storms

Location: Jakarta, Indonesia


3 Comments

vscid - 5 Sep 2013, 7:40 p.m.

Gabor: GIS software solutions have incrementally bridged this gap over the years. With the new advances, country specific geo-data, can be mashed up with various insurance asset data, building codes, bylaws, to give a real-time visualization of events, along with predictive analytics. Infact, Tech Mahindra undertook a similiar project of massive size for a large Oil and Gas company (Fortune 10), where we built applications to provide prognostic visualization for their high risk, high value zones by integrating the hurricane data. The ROI was typically 12-18 months. I think the same can be applied to Insurance, while integrating this with underwriting.

Gabor Jaimes - 5 Sep 2013, 10:49 p.m.

Hi. Thanks for your very interesting comment. Does your analysis consider all uninsured property/infrastructure assets of a city/region? Which cities/regions have you analysed so far? My current focus is on emerging markets in Asia since the insurance protection gap in case of natural disasters is the largest in those countries.

Piotr - 29 Sep 2013, 12:14 p.m.

It seems that usual risk survey measures before construction procedure could be pretty effective. The surveys as utilised in an insurance industry would be some kind of assistance at a step of planing of new fecilities or enhancement of existing ones.


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