Poor need greater financial protection from disasters

PUBLISHED : Friday, 16 December, 2011, 12:00am
UPDATED : Friday, 16 December, 2011, 12:00am


It seems the number of natural disasters is rising. Names like Katrina and Nargis, events like the Asian tsunami of 2004, the fires and flooding in Queensland and the earthquakes in Kashmir and Sichuan are still fresh in our minds. Right now, thousands of people in Thailand are clearing mud from their flooded homes, with many grieving for those who died.

Many scientists believe that climate change - seen clearly in such indicators as rising sea surface temperatures - is creating a trend towards more and bigger storms. Data from reinsurance giant Munich Re's Geo Risks Research unit shows the number of major storms and floods worldwide roughly doubling in the past 30 years. The trend for earthquakes has remained virtually level. Yet even they seem to have become deadlier. What is going on?

The simple explanation is that the human population is rising, and people in search of land are moving into regions that are more exposed to disasters. A small number of major earthquakes account for most of the deaths from natural disasters. The regions they affect - hilly regions in Pakistan or China, or coastal areas in Japan or the Indian Ocean - have more and bigger villages and towns than they did, say, 50 years ago.

People expose themselves in other ways. For example, replacing forests with farmland and turning countryside into concrete-covered towns is bound to make flooding worse than it would otherwise be.

Research by the World Bank shows that, in 160 countries and territories, more than 25per cent of the population live in areas exposed to a serious risk of deadly disasters. In the worst example, nearly 75per cent of the population and land area are vulnerable to three or more serious risks. This is not somewhere in Africa or South America; it is Taiwan.

Taiwan's worst experience in the past 30 years was the Nantou earthquake in 1999, which claimed over 2,400 lives and cost billions of dollars in damage. Typhoons Herb, Nari and, most recently, Morakot accounted for another 800 deaths and more billions lost.

By the standards of poorer places like the Philippines or Thailand, Taiwan has good-quality infrastructure and emergency systems. Its death toll from such disasters would be much worse if that were not the case. In dollar terms, the financial cost is much higher than it would be in less developed economies, where the infrastructure and equipment are more basic.

However, a farmer or a villager in the Philippines suffers far more from a US$500 loss than a Taiwanese does from a US$5,000 one - though, of course, the suffering is great for all victims. Across Asia, officials put a great priority on economic growth and the development of infrastructure, yet they leave populations without basic insurance against catastrophe.

Prevention is better than cure. Stronger defences and moves towards more renewable energy would be ideal ways to reduce damage from disasters. But we cannot end natural catastrophes, and Asia's cities and coastlines are getting more crowded and developed.

Traditional insurance approaches (I am involved in the sector myself) have their limits where catastrophes are concerned. Morakot caused US$1.6 billion worth of losses (in original values) in Taiwan, the mainland and the Philippines, yet only about US$100 million was insured.

New ideas are needed. One source is the non-profit Munich Climate Insurance Initiative, under which public and private bodies examine new ways to cover populations exposed to all sorts of risks from earthquakes and storms to heat waves and droughts. Pilot projects include microinsurance for poor communities and coverage for rural co-operatives' loans. The governments, international agencies and private expertise concerned are also looking at ways they can combine their work with efforts to help counter climate change.

Unlike a disaster, this may not be a big front-page story - but it is an encouraging one.

Bernard Chan is a former member of the executive and legislative councils