ADB cites economic cost of natural disasters

MANILA, Philippines - In the last 20 years, Asia has borne half the estimated global economic cost of natural disasters – about $53 billion annually.

“This could potentially wipe out gains from economic growth in many economies,” the Asian Development Bank warned.

Direct physical losses from disasters have significantly outpaced growth in gross domestic product (GDP) in the past four decades. And yet, the region has not tapped insurance to protect itself.

Based on the Lloyd’s 2012 Global Underinsurance report, the ADB noted that eight of the world’s 17 most underinsured countries are in Asia.

These are Bangladesh, China, Hong Kong, India, Indonesia, Philippines, Thailand and Vietnam.

It also warns the gap between total economic losses and insured losses can be so wide that it may outstrip the government’s ability to act as insurer of last resort.

Lloyd’s Asia Pacific head Kent Chaplin warned that the swift urbanization in the region was putting pressure on cities putting many more assets at risk,” Chaplin said. “With increasing populations, more people are moving from the rural areas into the cities putting more pressure on water, food and infrastructure, and it means catastrophes can have a much bigger impact.”

He lamented that the level of insurance penetration hasn’t caught up with the level and pace of economic growth. “There is a gap that needs to be filled.”

Typhoon Yolanda (Haiyan) was responsible for at least 6,268 deaths across the Philippines when it struck last year causing huge economic distruptions.

In Japan, only $35 billion of the estimated $210 billion of total economic losses wrought by the March 2011 Tohoku earthquake and tsunami was insured.

Myanmar has yet to recover fully from Cyclone Nargis, which devastated the Ayeyarwady Delta region in 2008.

According to official figures 84,500 people were killed and 53,800 went missing when the very severe storm hit, sending a storm surge 40 km up the densely populated delta region.

The Lloyds report, which was being quoted by the ADB, said that the consequences are far reaching for countries that have a major catastrophic event.

“It’s not just the economic cost, but the humanitarian cost – the cost of life, livelihood, the time it takes to recover etc. One thing our underinsurance report picks up on is that most of the cost falls to the taxpayer and that’s where insurance can play a vital role in bridging that gap between what the government has to fork out and what’s insured,” Chaplin added.

Lloyd’s is the world’s specialist insurance market providing insurance services in over 200 countries and territories.

It does extensive research, in the preventive fashion, to almost all industries, including the environment and natural catastrophe.