The fight to reduce global economic losses from natural disasters “is next to impossible” as rising wealth, population and urbanisation levels drive the upward trend, according to leaders from AIR Worldwide and the UNISDR.
Speaking at the 3rd UN World Conference on Disaster Risk Reduction (WCDRR) in Sendai, Japan, Dr Milan Simic, Senior Vice President (SVP) and Managing Director of International Operations at AIR and Jerry Velasquez, UNISDR Chief of Section, Advocacy and Outreach, presented preliminary findings from an ongoing collaborative study.
“What the study tells us is that it is next to impossible to reduce existing levels of economic losses but that they provide a baseline and a context for improving on key areas of development over the lifetime of the new framework for disaster risk reduction which hopefully will be adopted tomorrow,” concluded Dr. Simic.
This point emphasises the continued and increasing need for adequate, global risk transfer tools in order to successfully develop global resilience to natural disasters, something Artemis recently discussed in light of the recent UN event.
The knowledge and expertise, sophisticated modelling, pricing and risk management practices offered via the insurance, reinsurance and insurance-linked securities (ILS) world can greatly aid the goal of lowering the annual average economic loss total, which the combined study puts at a normalised $240 billion.
And this figure doesn’t include man-made catastrophes, which the report notes would be more in line with estimations given in the UNISDR’s ‘2015 Global Assessment Report for Disaster Risk Reduction,’ of $250 – $300 billion.
The UNISDR and AIR report looks at global average annual economic losses from natural catastrophes between 1994 and 2013, revealing an apparent upwards trend.
But in order to “reasonably compare the cost of past and more recent disasters on a like-for-like basis,” AIR and the UNISDR normalised the losses.
This involves factoring in the population, wealth, locations and volume of properties as of 2013 and applying it to disasters from previous years. This then shows no upwards trend but instead reveals that annual economic losses from 1994 to 2013 oscillate around the $240 billion mark.
What this means, according to Dr. Simic, is that “the development of the world, the world getting richer, more buildings being built and more buildings in harms way is a stronger driver of increasing economic losses than hazards.”
Adding; “That enables us to make several recommendations to address those drivers of increasing economic loss.”
A key target of the new ‘Framework for Action on Disaster Risk Reduction’ proposed at the WCDRR is to reduce global economic losses from disasters by the year 2030.
To achieve this and in light of the study’s findings, Jerry Velasquez from the UNISDR advises, “we need to massively improve urban planning and control new risks.”
This involves targeting the developing, expanding cities that are going to become the larger cities of the world over the next 15 years, because these are the cities where new risks are going to be created, explained Velasquez.
“We want wealth and growth that doesn’t create risk,” urged Velasquez, giving an example of resisting building new factories in flood prone areas. As this entices the workers to live near the factory and then they too become the risk.
While disaster resilience is clearly the ultimately goal it’s worth remembering the benefits and insight the risk transfer world can provide.
Lasting, effective disaster resilience programmes will likely take time to make an impact, while the willing, ready and capable traditional and alternative insurance, reinsurance and risk transfer market can definitely speed things up or support resilience efforts through financing and taking away the peak disaster risks.
“In order to limit economic losses in the future, we need to improve urban planning and make economic growth resilient.”
If we do nothing the trend of losses will continue upwards,” concluded Velasquez.
Subscribe for free and receive weekly Artemis email updates
Sign up for our regular free email newsletter and ensure you never miss any of the news from Artemis.