Top insurance and reinsurance organisations have called on governments of the world to increase efforts to raise resilience against natural disasters, highlighting the gap between economic and insured losses as an area that the industry can support resilience goals.
Average economic losses from natural disasters and extreme weather events in the last decade amounted to around US $190 billion annually, while average insured losses were at about US $60 billion. The $100 billion per year gap needs to be narrowed, to support and finance resilience efforts and enable communities to recover more rapidly when disasters do strike.
A statement released on Saturday by top insurance and reinsurance companies and members of the UNEP FI Principles for Sustainable Insurance (PSI) initiative between the UN and the insurance industry, calls for governments to support the goals of the 3rd UN World Conference on Disaster Risk Reduction meeting in Sendai, Japan.
The ‘United for Disaster Resilience Statement’ is backed by insurers representing about 15 per cent of the world’s premium volume and US $9 trillion in assets under their management, through the PSI initiative.
The Statement urges governments to adopt the UN Post-2015 Framework on Disaster Risk Reduction, explaining that the insurance and reinsurance industry is well placed to understand the economic and social impact of disasters given that its core business is to understand, manage and carry risk.
The Statement also underscores the value of disaster risk reduction, especially in the context of climate change adaptation, and the need for climate change mitigation. It also welcomes the inclusion of the private sector in the new global framework for disaster risk reduction, which is anticipated to be adopted during the important meetings in Sendai.
Achim Steiner, UN Under-Secretary-General and Executive Director of the UN Environment Programme (UNEP), commented; “Building disaster-resilient communities and economies for the future will require an ‘all hands on deck’ approach. Public-private collaboration is key to the success of such efforts.”
“The vision and initiative demonstrated by the insurance industry—from the launch of the landmark Principles for Sustainable Insurance at the Rio+20 conference to the strong, united commitments made, here, in Sendai—provide inspiration and a way forward.”
“Disasters undermine hard-earned development gains and perpetuate poverty. Over one million people lost their lives due to natural disasters in the last one hundred years and the numbers have almost doubled in the last decade alone, with average economic losses estimated at US $190 billion annually. Building resilience against natural disasters, exacerbated by climate change, is a global priority that calls for decisive and urgent action by multiple actors at all levels,” Steiner added.
UNISDR head, Margareta Wahlström, the Special Representative of the UN Secretary-General for Disaster Risk Reduction, said about the reinsurance industry statement; “The vision outlined by the insurance industry in shaping a resilient and sustainable future should inspire other industries to do the same. The strong engagement of the private sector is crucial to reducing disaster risk and avoiding the creation of new risks. Through its united stance on and commitment to disaster resilience, the insurance industry is leading by example.”
Another PSI initiative launched at the Sendai meeting called on individual insurance and reinsurance organisations to help implement the Post-2015 Framework for Disaster Risk Reduction by making voluntary, specific, measurable and time-bound commitments. These initiatives are in line with the PSI’s vision — a risk aware world, where the insurance industry is trusted and plays its full role in enabling a healthy, safe, resilient and sustainable society.
The voluntary commitments will follow the global framework afforded by the four Principles for Sustainable Insurance, and will show concrete actions that build disaster resilience, and promote economic, social and environmental sustainability.
These commitments will be aggregated and promoted over the course of a number of other meetings during the year as the work ongoing in Sendai is continued.
Michael Morrissey, President & CEO of the International Insurance Society, a signatory to the statement, commented; “Managing risk is core to the purpose of the insurance industry. Recognising the unique roles of the insurance industry as risk managers, risk carriers and institutional investors is key to harnessing its full potential in disaster risk management, and in supporting the transition to a sustainable economy. We look forward to strengthening our collaboration with the UN in this milestone year for sustainable development.”
The statement from the insurance and reinsurance industry can be read in full below. If your organisation would like to add your support, you can add yourselves as signatories to the statement at this website.
Also read Artemis’ thoughts on the important role that insurance, reinsurance and also insurance-linked securities (ILS) and the capital markets can play in disaster risk transfer to encourage and support resilience efforts.
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United for disaster resilience:
The insurance industry’s statement in support of disaster risk reduction
We in the insurance industry are well placed to understand the economic and social impact of disasters. We understand the value of disaster risk reduction, especially in the context of climate change adaptation, and the need for climate change mitigation. Our core business is to understand, manage and carry risk. In the past decade, average economic losses from disasters were about USD 190 billion per year, while average insured losses were about USD 60 billion per year. This century, more than one million people have already lost their lives to disasters.
In March 2015, at the 3rd United Nations World Conference on Disaster Risk Reduction in Sendai, Japan, a new global framework will be adopted to help governments at all levels better prepare for disaster risk and to improve the resilience of nations and communities to disasters. This framework, for the first time, includes a role for the private sector to contribute to disaster resilience, in line with the “five private sector visions” below. We support the inclusion of the private sector in this framework, and believe there is a particular role for the insurance industry–as risk managers, risk carriers and institutional investors–in implementing this framework, as outlined under each vision below.
- Strong public-private partnerships drive disaster risk reduction and resilience at the local and national levels: We believe that the insurance industry’s extensive experience and expertise in risk management–from identifying, assessing, preventing and reducing risk, to pricing, carrying and diversifying risk–can contribute not only to developing risk transfer solutions, but also, and particularly, risk reduction strategies.
- Resilience in the built environment is driven by the public sector setting adequate minimum standards, and the private sector voluntarily working towards optimal resilience: We believe that insights, data and tools from the insurance industry on disaster risk can help inform the debate on issues such as land use, building codes and standards, and zoning.
- All financial investment and accounting decisions, public and private, are risk-sensitive: We believe that certain proactive risk reduction and risk transfer strategies identified by the insurance industry can help protect investments and economies, and create long-term value.
- A resilience-sensitive public and resilience-sensitive businesses drive each other towards resilient societies: We believe that the insurance industry can play a key role, alongside governments, the broader business community and civil society, in raising awareness of disaster risk and in promoting disaster risk reduction, in addition to developing risk transfer solutions and making risk-sensitive investments.
- The identification, disclosure and proactive management of risks carried by companies and public sector entities is standard practice: We believe that the strong risk management processes, models, analytics and metrics developed by the insurance industry can serve as a model for understanding and reducing risk across a broad range of industries and public sector entities.
Reinforcing previous messages and collaborative efforts by the insurance industry, we, the signatories of this Statement strongly encourage the adoption by all countries of the Post-2015 Framework for Disaster Risk Reduction. We commit to working with governments and other public, private and civil society stakeholders to help implement this framework in order to build disaster-resilient communities and economies, and promote economic, social and environmental sustainability.