With scientists projecting increased intensity and frequency of severe weather in Asia, questions abound regarding sustainability of risk prevention and protection in the region.
Several regions in Asia were hit by widespread natural disasters this summer. A flood in Pakistan destroyed 1.25 million homes and more than 6.9 million hectares of crop lands and is estimated to bring economic losses of US$20 billion, according to Aon Benfield. At least 1,667 people were killed and an additional 2,605 were injured.
Monsoon rains in August also damaged at least 3,000 homes in Indonesia and 10,000 homes in India's Kashmir.
And in China, heavy rains in July and August caused flash floods and landslides in various provinces including Gansu, Sichuan, Shaanxi and Yunnan. This led to 829 deaths, and damages to 800,000 homes and more than four million hectares of crop lands. Total economic losses were estimated at US$16.02 billion.
The massive floods and mud-rock flows triggered by torrential rains in Zhouqu county of Gansu province killed at least 1,467 people and injured another 2,000, with 298 missing.
Every year in China, an estimated 200 million people are affected by natural catastrophes, said Peter Hoeppe, head of geo risk research at Munich Re.
However, natural catastrophe coverage is not widespread in the individual, company and municipality levels--despite China's quickly growing insurance market. At the same time, Hoeppe said, economic values, especially in big cities, are rising rapidly.
"China's risk landscape will become more complex as economic prosperity grows," said Hoeppe, citing the increased demand for natural catastrophe insurance.
Measures for risk prevention and transfer are necessary in China to reduce the burden on government. "It might also make economic sense for the state and municipalities as the biggest owners of property to transfer their risk to the worldwide insurance sector," he said.
Because of the sheer size and complexity of exposures, individual risk solutions of single companies probably won't work, Hoeppe said, noting a natural catastrophe pool is needed to protect public and private properties.
Weather activities in China in 2010 have been extreme, according to the World Meteorological Organization.
"Since May 2010, 14 successive torrential rains have hit the South China and broad areas to the south of Yangtze River, leading to concurrent floods and geological disasters," WMO said in a report. This summer, a heat wave also hit many parts of China with historical high temperatures.
The sequence of these events matches the projections of more frequent and intense extreme weather events due to global warming, according to WMO. China is especially affected by climate change and will be even more so in the future due to its exposures to all weather related perils, large population and fast economic growth, Hoeppe said.
While climate change is expected to have a significant impact on losses in the coming decades, its consequences will emerge gradually. Hoeppe said substantially better data has to be gathered in many regions before it's known how to take climate change into account in loss models and premiums.
The high number of catastrophic events in Asia this summer won't impact premium rates. "The frequency of natural catastrophes has always fluctuated from one year to the next and will doubtlessly continue to do so," Hoeppe noted. "For us, that's business as usual."
Since 1980, there has been a threefold increase in floods throughout the world. Hoeppe said the number of windstorm losses have risen as well. Growing populations, more people living in high risk areas, and increasing economic values of risk have contributed to higher property/casualty losses.
Although one extreme weather event by itself doesn't prove climate change, Hoeppe noted meteorological data and studies "suggest a trend toward ever more extreme weather events that can not be fully explained except by climate change."
Asia has been the continent with the largest increase in frequency of weather-related disasters over the past 30 years, Hoeppe said. Loss-related events have tripled, presenting new challenges for all exposed economies. Also, Asia experienced a temperature increase of more than one degree celsius.
In 2009, 34% of the 850 global natural catastrophes occurred in Asia, accounting for 31% of overall economic losses. However, Hoeppe said only 7% of the losses were insured. About 71% of all fatalities from natural disasters were recorded in Asia.
In Pakistan, Hoeppe said, La Nina rather than climate change is seen as the cause for the floods.
Insurance penetration is low in developing countries. However, Hoeppe said "to my mind, it makes no sense to think about insurance solutions at a time when people are struggling merely to survive."
"In such situations, assistance has to come from the state, or as in the present case of Pakistan, from the entire world because the state is also unable to cope," Hoeppe said. The insurance sector can also support developing countries in taking necessary adjustment such as the climate insurance initiative in Munich. i don't know what previous sentence means, so I'd take it out, unless it's clear to insurance-minded folk/rw
In the long run, innovate insurance solutions play a role to help mitigate the impact of climate change, along with the development of climate protection technologies, Hoeppe said.
(By Iris Lai, Hong Kong bureau manager: [email protected])