Monthly Archives: March 2017

Swiss Re: Global insured losses from disaster events were USD54bn in 2016, up 42% from 2015

  • Global total economic losses from disaster events were USD 175 billion in 2016, up from USD 94 billion in 2015
  • Insured losses from disasters were USD 54 billion in 2016, up 42% from 2015, and the highest since 2012
  • Earthquakes, storms, flood events and wildfires caused extensive damage across many regions
  • Disaster events claimed around 11 000 victims in 2016

Total economic losses from natural catastrophes and man-made disasters amounted to USD 175 billion in 2016, almost twice the USD 94 billion seen in 2015, the latest sigma study from the Swiss Re Institute says. Global insured losses from disasters were USD 54 billion in 2016, up from USD 38 billion in the previous year. The losses in 2016 – both economic and insured – were the highest since 2012 and reversed the downtrend of the last four years. This was due to a high number of sizable disaster events, including earthquakes, storms, floods and wildfires in 2016, across all regions. Some events struck areas with high insurance penetration, which accounted for the 42% increase in insured losses. That also means that many people in those areas were better equipped to recover from the shock of a disaster, for example with prompt settlement of their insurance claims.

Globally there were 327 disaster events in 2016, of which 191 were natural catastrophes and 136 were man-made. In total, the disasters resulted in economic losses of USD 175 billion, almost double the level in 2015. As in the previous four years, Asia was worst hit in terms of the number of disaster events (128) and resulting economic losses (approximately USD 60 billion). The earthquake on Kyushu Island, Japan in April inflicted the heaviest economic losses, estimated to be between USD 25 billion and USD 30 billion. Worldwide, around 11 000 people lost their lives or went missing in disasters in 2016, down from more than 26 000 in 2015.

Notable increase in insurance payouts in 2016
Global insured losses last year were USD 54 billion, significantly higher than in 2015 and in line with the inflation-adjusted annual average of the previous 10-years (USD 53 billion). Natural catastrophes resulted in claims of USD 46 billion, the same as the 10-year annual average. Insured losses from man-made disasters were USD 8 billion, down from USD 10 billion in 2015.

“In 2016, both economic and insured losses were close to their 10-year averages. Insured losses made up about 30% of total losses, with some areas faring much better because of higher insurance penetration,” says Kurt Karl, Chief Economist of Swiss Re. For example, North America accounted for more than half the global insured losses in 2016. This was largely due to a record number of severe convective storm events in the US, and the level of insurance penetration for such storm risks in the US is high. The costliest was a hailstorm that struck Texas in April, resulting in economic losses of USD 3.5 billion, of which USD 3 billion were insured, so about 86% of losses were covered. Many households and businesses were insured, and they were well covered for the heavy damage to property caused by large hailstones.

A year of disasters across many peril types and all regions
In terms of devastation wreaked, there were large-scale disaster events across all regions in 2016, including earthquakes in Japan, Ecuador, Tanzania, Italy and New Zealand. In Canada, a wildfire across the wide expanses of Alberta and Saskatchewan turned out to be the country’s biggest insurance loss event ever, and the second costliest wildfire on sigma records globally. There were also a number of severe flood events in 2016, in the US, Europe and Asia, and there was Hurricane Matthew, the first Category 5 storm to form over the North Atlantic since 2007. Matthew caused the largest loss of life – more than 700 people died, mostly in Haiti – of a single event.

Table 1 indicates the large opportunity for insurance to help strengthen worldwide resilience against disaster events. The shortfall in insurance relative to total economic losses from all disaster events – the protection gap – was USD 121 billion in 2016. Insurance coverage is not universal. For example, while a high-level of insurance penetration in New Zealand meant that households and business were well equipped to recover from the damage caused by the quake that struck the South Island in October 2016, in Japan’s Kyushu Island only around 20% of the economic losses from the earthquake in April were covered by insurance. And in Ecuador, the quake on the same day in April caused estimated economic losses of USD 4 billion, but insured losses of just USD 0.5 billion. “In many parts of the world, insurance can play a much bigger role in helping households and communities recover from the losses and shock that disasters can inflict”, Karl continues.

Canada burning: buildings and forests destroyed by fire
One area where communities benefitted from having insurance in 2016 were the wide expanses of Alberta and Saskatchewan in Canada, which were engulfed by wildfires from May through to July. This was just one of many wildfires in North America last year, sparked by severe dry weather conditions. It was also the most destructive wildfire, burning many buildings and 590 000 hectares of forest land. Many homes were destroyed and around 88 000 people were evacuated from the impacted areas. Overall economic losses from the fires were USD 4 billion, of which close to USD 2.8 billion (70%) were covered by insurance. Once the evacuation order had been lifted, insurance personnel was given immediate access to the affected regions in order to assist returning residents. There were record payouts by insurers and 68% of all personal property claims had been settled by the end of the year.

Floods in many regions
There were also many severe precipitation events in 2016, which in turn triggered major flooding over large areas. At the end of May and the beginning of June thunderstorms, torrential rain and flooding – river and flash floods – hit France, southern and central Germany and Belgium, leading to combined economic losses of USD 3.9 billion, and insured losses of USD 2.9 billion. In China, there was extensive flooding along the Yangtze River basin in July. The economic losses were estimated to be USD 22 billion, making it the costliest Yangtze River flood event since 1998. Here, however, with low insurance penetration, the insured losses were just USD 0.4 billion.

The US was also hit by floods. There were four separate multi-billion dollar-loss floods in 2016, the worst being the inland flooding of southern Louisiana and Mississippi in August. The topography of southern Louisiana – largely wet and low-lying land through which many rivers run – makes the region vulnerable to flooding. The banks of many rivers burst after extreme rainfall, resulting in widespresad flooding of adjacent areas, and accumulated economic losses of USD 10 billion. In the US, however, flood risk remains critically underinsured, even though much of the country is exposed to flooding. In the case of the Louisiana and Mississippi floods, less than a third of the economic losses – around USD 3 billion – were covered by insurance. This sigma includes a special chapter on the level of under-insurance of flood risk in the US.

Notes to editors

Swiss Re
The Swiss Re Group is a leading wholesale provider of reinsurance, insurance and other insurance-based forms of risk transfer. Dealing direct and working through brokers, its global client base consists of insurance companies, mid-to-large-sized corporations and public sector clients. From standard products to tailor-made coverage across all lines of business, Swiss Re deploys its capital strength, expertise and innovation power to enable the risk-taking upon which enterprise and progress in society depend. Founded in Zurich, Switzerland, in 1863, Swiss Re serves clients through a network of around 80 offices globally and is rated “AA-” by Standard & Poor’s, “Aa3” by Moody’s and “A+” by A.M. Best. Registered shares in the Swiss Re Group holding company, Swiss Re Ltd, are listed in accordance with the International Reporting Standard on the SIX Swiss Exchange and trade under the symbol SREN. For more information about Swiss Re Group, please visit: www.swissre.com or follow us on Twitter @SwissRe.

Accessing data by sigma:
The data from the study can be accessed and visualised at www.sigma-explorer.com. This mobile enable web-application allows users to create charts, share them via social media and export them as standard graphic files.

How to order this sigma study:
The English, German, French, and Spanish versions of the sigma No 2 /2017, Natural catastrophes and man-made disasters in 2016: a year of widespread damages are available on the sigma section: www.swissre.com/sigma

Printed editions of sigma No 2/2017 in English, German, French and Spanish are available. The printed versions in Chinese and Japanese will be available in the near future. Please send your orders, complete with your full postal address, to sigma@swissre.com

New EWS-WWF and Acclimatise report identifies climate change risks and opportunities for UAE

A report produced by the Emirates Wildlife Society in association with WWF (EWS-WWF), co-authored by Acclimatise and sponsored by Farnek Services, has revealed a comprehensive summary detailing the projected risks and impacts of climate change in the UAE. The report titled, ‘UAE Climate Change Risks & Resilience: An overview of climate change risks to 12 key sectors,’ is available online today and demonstrates how climate change can affect various sectors such as food, energy and water.

The report aims to improve awareness and understanding of the risks posed by climate change among public and private sector decision makers and policymakers. It is hoped that the findings and recommendations will act as a catalyst for action, increasing the prioritisation of climate change in the UAE, and encourage greater implementation of evidence-based adaptation measures.

The report incorporates feedback from over 30 UAE and regional entities, and outlines the key risks to 12 essential sectors in the country, including: energy & water, transport & logistics, marine and terrestrial ecosystems & biodiversity, health & well-being, oil & gas, industry, buildings, construction & real estate, financial services, cultural heritage, hospitality & tourism, and food security (domestic production and international imports.

Manuel Pulgar-Vidal, WWF’s global Climate and Energy Practice leader, said: “The well-being of societies, the growth and diversification of economies, and the preservation of the natural world, are at great risk from climate change. The latest findings in this report confirm that unconstrained carbon emissions have wide-reaching ramifications, and pose a sobering risk to nearly every sector of economy, business and society.”

Key highlights from the report include:

  • Food Imports, Production & Security: 87% of the UAE’s food supply is reliant on agricultural production abroad, and thus prone to climate change impacts. This will affect the reliability of international food markets and could contribute to a rise in food prices, with consequences for lower-income households making them more vulnerable to price shocks as a larger share of their budgets will be spent on food. Climate change will also impact the nation’s domestic agriculture, leading to an overall decline in agricultural output.
  • Energy Sector: By 2050, average temperatures in the UAE are projected to increase by 2oC, along with humidity, which is likely to increase by up to 10%. The resulting increased demand for cooling from buildings and industry are likely to create an energy demand-supply gap over time, hamper energy security, increase costs to end-users and produce additional greenhouse gas emissions. For example, air conditioning demand (for cooling and fans) in typical UAE residential villas could increase by between 10% – 35% by 2050, depending on the future CO2 emissions scenario.
  • Health & Well-being: Higher temperatures and humidity will decrease the productivity of outdoor workers and increase their overall risk, which is projected to cause losses of up to USD2trillion globally due to health-related impacts. Outdoor employees will likely slow their pace, take longer breaks and shift their work to cooler dusk and dawn hours.
  • Economy: Climate change trends can also affect private equity investments. Due to their longer-term nature, some investments could be more exposed to climate change-induced business risks, making projections of returns and exit strategies more uncertain if climate change consideration are not properly taken into account from the outset.

Laila Mostafa Abdullatif, Deputy Director General at EWS-WWF, explained: “The UAE is vulnerable to the impacts of climate change as are all countries around the world; its effects are already being felt, and are set to increase if we don’t act further. If these impacts and risks are left unmanaged, it could be more challenging and costly to achieve the UAE’s national strategies and plans. We encourage all private sector champions, public sector policymakers and civil society leaders to share the responsibility, and play a part in developing and implementing adaptation strategies to boost resiliency and safeguard the economy, society and environment— as outlined in the report.”

The final report, which summarises findings from an extensive literature review of over 100 scientific reports and data, was developed over the course of 2016, during which EWS-WWF conducted roundtable sessions to present findings, and engage on content with 60+ stakeholders in the public and private sector, academia and civil-society.

Highlights of the findings will also be shared through a webinar on April 10th, 2017. To sign up for the webinar, register online at this link.

Download the report from our resources library and make sure you visit the EWS-WWF report website.

Click on the image below to see the report’s infographic in full size.

The impact of floods in Southeast Asia means new insurance strategies are needed

Southeast Asia is perpetually and increasingly at risk of flooding, with serious consequences for human life and health – not to mention economies and the environment. So now is the time to look for new strategies and solutions in a bid to save lives and avoid spiralling costs.

Statistics show a clear increase in the frequency and severity of flooding in Southeast Asia over the past few decades. According to the United Nations Office for the Coordination of Humanitarian Affairs, 9.6 million people in the region were affected by flooding in 2011, with 5.3 million in Thailand alone. That year, the Thai floods were labelled the worst in 50 years by the National Committee for Disaster Management and the Department of Hydrology.

Then a 2013 report by the Asian Development Bank revealed that in the period from 2000 to 2009, floods and storms caused 1,215 disasters in Asia compared with just 502 in the 1980s. Importantly, figures for geophysical disasters such as earthquakes, tsunamis and volcanic eruptions over the same period stayed roughly the same. So what’s going on? Is this a climate change issue or one of urban development? And most importantly, what can be done by those who are concerned about the situation in Southeast Asia? 

Reassessing our strategies

Anything that costs human life and health costs society. A report by the think tank World Resources Institute revealed that the poorest Southeast Asian countries are particularly at financial risk as a result of flooding. Vietnam has 2.29% of its total GDP exposed to river flooding alone, Cambodia 3.42% and Laos 2.22%.

Vietnam has 2.29% of its total GDP exposed to
river flooding alone, Cambodia 3.42% and
Laos 2.22%.

Across in Indonesia, floods are the most common natural disaster – 97% of disaster events between 2012 and 2014 were hydrometeorological, with floods the most frequent. They are also the most deadly: During the same period floods claimed more lives than any other natural event.

Then there’s the economic impact: The country is hit by flooding to some degree during every rainy season (just last month Indonesia had to contend with more rainfall in a day than it usually sees in a month), and these events hit the economy to the tune of more than USD 2 billion a year.

It’s a similar tale in Thailand where according to a report by the Geneva Association (International Association for the Study of Insurance Economics), the 2011 Thai flood disaster caused losses equivalent to 12% of its GDP – or USD 43bn. Without additional investment, climate change-related floods alone are predicted to lead to average annual economic losses across Asia of USD 500bn or more by 2050 – compared to average annual global flood losses of around USD 30bn between 2004 and 2013.

Insurance against these types of losses is particularly low in Asia. A report by German reinsurer Munich Re found that for every euro loss caused by a natural catastrophe in Asia, only eight cents were covered by insurance between 1980 and 2012 (compared with 40 cents for the US).

If we want to help Southeast Asia stay in control of the health and economic consequences of its current and future flood risk, we need to invest and rethink some of our strategies.

Here are some initial suggestions:

1. Invest in intervention and early warning: Early warning systems can save lives by giving people time to leave potential disaster zones. Investing in them should be a priority. In Vietnam, the Pacific Disaster Center has created VinAWARE. This integrates map data, impact models, rain- and stream-gauge measurements, and meteorological forecasts to provide early warnings and to give the government more time to make important decisions.

2. Invest in community knowledge and health: Many of the disease-related costs during and after a flood can be better managed by educating people on their own personal responsibility (to themselves and others) before and during flood events. Research by the University of Alberta, Canada, shows that such programmes are currently grossly underfunded.

As an example of what can be achieved, the Intermediate Technology Development Group in Bangladesh has concentrated efforts on helping local communities improve housing. Education on raising the foundations of homes, promoting durability by treating building materials, and improving ventilation has all been provided.

Educating local people on the need to maintain sanitation during a flood can also help to reduce the transmission of common post-flood diseases. The most frequently documented disease in the immediate aftermath of a natural disaster is diarrhoea – responsible for 40% of deaths in disaster and refugee camp environments. In most cases, its spread can be greatly limited simply through basic hygiene practices – regular hand-washing and ensuring the cleanliness of cooking and eating utensils, for example.

Educating local people on the need to
maintain sanitation during a flood can also
help to reduce the transmission of
communicable disease and outbreaks such as
diarrhoea.

Leptospirosis – a bacterial infection which elicits flu-like symptoms – is another disease which commonly spreads after heavy floods. Again, the spread of this disease can be greatly controlled if those in disaster-affected areas know what precautions to take. For example, adequate wound dressing and cleaning can go a long way in preventing an outbreak.

The WHO has already put initiatives in place to educate flood-affected communities on such measures – including teaching basic first aid to limit the number of exposed wounds and making sure the poor are properly vaccinated. This can also reduce infection rates and therefore the impact and cost on healthcare systems.

3. Close insurance gaps: The risk of flooding is a difficult thing to insure against and something many cannot afford. As the Economist has pointed out, tsunamis and cyclones do not seem a close enough threat to acknowledge on a day-to-day basis, even if the poor could afford the premiums. However, Southeast Asian governments could take note of what is happening around the rest of the world. Risk-pooling, whereby governments set up a multi-country, disaster-relief insurance, is a growing phenomenon, with the Caribbean Catastrophe Risk Insurance Facility a prime example. Started by the region’s governments, donors and experts from the World Bank, it provides rapid, short-term liquidity to a government affected by an earthquake or hurricane to provide relief to healthcare systems and local communities. This is contrary to traditional indemnity insurance, which takes far longer to pay out because payments are based on confirmation of a loss. 

4. Be proactive during each flood stage: By understanding the three key stages – before, during, and after the flood – we can reassess our risk and disease-management strategies. Before the flood, in the panic of moving to safer ground, there can be minor injuries which later become infected by contaminated floodwater. During the flood there is an immediate increase in physical injury and mortality. From this point on, communicable disease becomes a much greater problem. After the flood, many people are left homeless and malnourished. There is also of course the impact on mental health for those surviving such traumatic experiences. 

A time for new ideas

A recent study in the journal Nature noted that, on a global scale, we can blame climate change many of the flooding problems we are seeing, but hone in on Southeast Asia and the story is more complex. A much bigger contributor to flooding here is caused by rapid socio-economic growth. Simply put, uncontrolled and unplanned urban development is raising the risk of floods, and the impact could be devastating. Estimates for Thailand alone suggest the annual costs of flooding may reach USD 22.5bn by 2030.

“Estimates for Thailand alone suggest
the annual costs of flooding may reach
USD 22.5bn by 2030.”

Given what we know about the growing prevalence and health risks of floods, governments, communities and insurance companies in Southeast Asia appear to be in sleepwalk mode.

The reality is that our knowledge of what can be done is high but ideas about how to afford and implement them are low. However, given predictions for climate change and other factors that will increase flood risk in vulnerable communities, no time should be wasted in devising innovative new strategies and solutions that will help to save lives, avoid health disasters and ultimately save millions of dollars.

author.jpg

About the author
John Le Boeuf, Founder and CEO of Cynergy Care
John Le Boeuf is the founder of Cynergy Corporation and has served as President & CEO of the various Cynergy companies since 2002. With a solid two decade senior management experience with key international and US managed health care companies, John has worked with market-leading companies such as Blue Cross Blue Shield, Mutual of Omaha Companies, and Cigna Health Care.

Zurich published 2016 Global Risks Report

This 12th edition of The Global Risks Report is published at a time of heightened political uncertainty, following a year of unexpected electoral results, particularly in the United States and the United Kingdom. Polarized societies and political landscapes are taking centre stage in many countries, with deepening generational and cultural divisions amplifying the risks associated with sluggish economic recovery and accelerating technological change.

These tensions have been building for some time, and over the past 10 years a nexus of social, political and economic fragilities has been a consistent focus of The Global Risks Report. The events of 2016 should serve as a wake-up call and prompt us to reassess our preparedness in the face of an evolving risk landscape.

While we should be wary of attributing too much influence to a series of very recent electoral results, the consequences of which are still unknown, major unexpected events can serve as inflection points. Long-term trends – such as persistent inequality and deepening polarization, which ranked first and third in perceived importance in the Global Risks Perception Survey (GRPS) this year – can build to a point at which they become triggers for change. This kind of change might involve risks intensifying or crystallizing, but it is important to recognize that shocks and releases of tension might also lead to a brightening of the risk outlook. We are in a period of flux; paradoxically this is therefore a time when things could improve.

The world is undergoing multiple complex transitions: towards a lower-carbon future; towards technological change of unprecedented depth and speed; towards new global economic and geopolitical balances. Managing these transitions and the deeply interconnected risks they entail will require long-term thinking, investment and international cooperation. It will also require policy-makers to bring voters with them – one of the lessons of 2016 is that we are very far from consensus on how to proceed.

This year’s Global Risks Report takes as its starting point the societal and political polarization that besets an increasing number of countries and that looks set to be a determining feature of the political landscape not just for the next few years but for the next few electoral cycles. In Part 1, the Report draws on the trends and risks highlighted in the latest GRPS to outline the key challenges that the world now faces: reviving economic growth; reforming market capitalism; facing up to the importance of identity and community; managing technological change; protecting and strengthening our systems of global cooperation; and deepening our efforts to protect the environment.

Part 2 explores three social and political risks in greater depth. The first chapter considers whether recent political trends amount to a crisis of Western democracy. It looks at underlying patterns that have led to a weakening of democratic legitimacy and points to three strategies that might help to restore it. The second piece highlights the importance of civil society in mitigating risks and assesses trends towards the curtailment of civil society organizations’ freedom to operate. The final chapter in this part of the Report looks at one of the gravest long-term challenges facing the world: how to build systems of social protection that can cope with the seismic demographic, economic and other changes that have transfigured social structures and individual lives over the last three decades.

Part 3 turns towards technology, which is at once a source of disruption and polarization and an inevitable part of whatever responses to these trends we choose to pursue. Informed by the results of a special GRPS module on emerging technologies, the urgency of the governance challenge in this area is stressed. This is followed by two in-depth assessments of specific technological risks: first, in relation to artificial intelligence, and second, in relation to our rapidly changing physical infrastructure needs and vulnerabilities.