China among countries underinsured against natural disasters, says ADB
The bank says Asia-Pacific, especially China, is underinsured against natural catastrophes
The Asia-Pacific region, and China in particular, is severely underinsured against natural disasters, which could result in losses big enough to wipe out gains from economic growth, says the Asian Development Bank (ADB).
Over the past 20 years, Asia has borne half the estimated global economic cost of natural disasters, amounting to about US$53 billion each year, according to its semi-annual report, Asian Economic Integration Monitor, released by the ADB yesterday.
Direct physical losses from disasters in the region in the past four decades have significantly outpaced growth in gross domestic product, it says.
"In the wake of a disaster, the gap between total economic losses and insured losses can be so wide that it may outstrip governments' ability to act as insurer of last resort," the report said.
For example, in Japan, only US$35 billion of the estimated US$210 billion of total damage wrought by the March 2011 earthquake and tsunami was insured.
The report also cites deficiencies in Myanmar.
More than five years after cyclone Nargis, one of Asia's deadliest storms, the inhabitants of the Ayeyarwady Delta have yet to fully recover, the report said.
Companies are also underprotected against disasters. Asia's telecommunications, energy and petrochemical firms underinsure their industrial assets by an average of 30 to 60 per cent.
The main reason why Asia is so vulnerable to disasters is the low penetration of insurance products in the region, says the bank.
"For most of Asia, insurance is expensive," the report said. "Distribution systems are less sophisticated and in many cases, simply suffer from poor regulation."
The bank calls for pan-government efforts in the region to cope with big disasters.
The respective governments in the region, it says, could strengthen financial resilience through special regulatory regimes for micro-insurance schemes or catastrophe-linked securities; introduce tax incentives for private insurance coverage; and enable the use of insurance as a risk management tool for public entities.
Citing a 2012 study by the Society of Lloyd's covering 42 economies, the report identifies eight Asian economies underinsured against non-life losses. These are Bangladesh, the mainland, Hong Kong, India, Indonesia, Philippines, Thailand and Vietnam.
The mainland appears to be the most underinsured in monetary terms, with US$79.6 billion worth of underinsurance against non-life losses in 2011.