RP among countries with highest risks due to climate change

The Philippines has been ranked among the highest in terms of environmental risks due to climate change, a global study showed.

In a study presented by Munich Reinsurance, the Philippines incurred an average annual direct damage of P15 billion (roughly $300 million) from 1970 to 2000, equivalent to an average 0.7 percent of gross domestic product (GDP).

Munich Re is one of the world’s largest reinsurers and the second-largest primary insurer in Germany.

The study cited as examples Typhoon Reming (international code name: Durian) in 2006 which caused damages worth $1 billion.

In 1995, Rosing (international code name: Angela) recorded damages worth roughly $576 million. In both cases, most of the estimated loss to life and property were uninsured.

In the annual global climate risk index covering the period 2006, the Philippines was ranked fourth in terms of death due to natural calamities, fifth in terms of total losses and third highest in terms of  impact to GDP.

Of the 15 countries prone to multiple hazards, the Philippines was ranked fourth most prone. The study further stated that a little over 23 percent of the total land area was exposed to various forms of climate hazards, exposing over 37 percent of the population.

Compounding the country’s woes is that climate change and global warning will likely aggravate the situation.

“Asia, including the Philippines, will be strongly affected, and that natural catastrophes will become predominantly urban events,” Michael Spranger, geo-risk research head of the Hong Kong branch of Munich Re, said in a presentation yesterday at the 5th Philippine Non-Life Insurance Summit.

To deal with natural disasters caused by climate change, countries must strengthen their non-life insurance industry so that it would be in a better position to help the Philippines deal with damages to life and property.

However, the non-life insurance industry in the Philippines still pales in comparison to its regional neighbors.

International credit rating agency Standard and Poor’s (S&P) has given the country’s non-life insurance industry a “negative” rating, the lowest in the region.

S&P said  inadequate capitalization and reserving, political uncertainty and a difficult investment climate are adversely impacting on the industry.

“Coupled with insufficient professional expertise and weak regulatory framework, has meant that the risk profile remain relatively high,” it said.

The high risk profile not only indicates the industry’s inability to meet the needs of the insuring public but also means it may not  receive favorable ratings from foreign reinsurance firms.

The country has 97 non-life insurers and four composite insurers with combined assets of P66.25 billion, still insufficient to cover of the high risk profile of the country. Domestic insurers still need to tap foreign reinsurers which slap the domestic players high risk premiums and other conditionalities, resulting in higher cost of  insurance.

“Only a consolidated industry that is stronger, more professional and highly capitalized will help lower the risk premiums from reinsurers,” S&P said.