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Tsunami 2004 was a “watershed moment”

23.12.2014 – aceh_tsunamiIn the decade since the devastating Indian Ocean tsunami, much progress has been registered in making catastrophe exposed Asian countries more resilient to disasters. However, exposures have been rising fast with rapid economic growth, outstripping efforts to mitigate and finance disaster risk.

2004 Asia was visited by one of the largest and deadliest natural disasters for generations. A major undersea earthquake triggered a massive tsunami that devastated coastal communities in 14 countries. Over 227.000 people lost their lives and 1,7 million people were displaced, according to the UN Office for Disaster Risk Reduction (UNISDR). At 16,34 billion dollar, economic losses from the tsunami were considerable, but they were also small compared with other recent major catastrophes in Asia. The majority of the areas swept away by the tsunami in 2004 were poor and uninsured. Low levels of insurance penetration saw insurers pick-up just 2,5 billion dollar of the cost.

The tsunami was a big wake-up call for Asian governments. It was a “watershed moment” for understanding tsunami, explains Robert Muir-Wood, Chief Research Officer at catastrophe modelling firm RMS. Now, several countries operate real-time seismic networks and are capable of estimating the event parameters within 10 minutes of the occurrence. “Establishment of monitoring and warning systems in different territories and coordination activities among different agencies stands out as a marked improvement from the past,” said Sastry Dhara, director at Impact Forecasting, the catastrophe analytics unit of reinsurance broker Aon Benfield. One of the main international disaster risk reduction initiatives to follow the 2004 tsunami was the 2005 Hyogo Framework for Action, a break-through ten-year inter-government action plan to reduce the impact of natural disasters facilitated by the UNISDR.

The private sector, including the insurance industry, has also launched initiatives to support governments in building resilience. For example, insurers are backing the Rockefeller Foundation 100 Resilient Cities scheme which aims to give cities better risk management tools as well as promoting resilience risk managers in Asian cities.

Insured losses for major catastrophes in Asia are still today typically less than ten percent of the economic loss, Malcolm Steingold, Chief Executive Officer of Aon Benfield Asia Pacific, said. Insurance penetration in rural areas remains stubbornly low and a large protection gap continues to exist. Figures from Swiss Re show that nonlife insurance penetration in Indonesia, India and Malaysia are still more or less unchanged from their 2004 levels at 0,5 percent, 0.6 percent and 1.5 percent in 2014, while Thailand has increased from one percent to 1,6 percent. The average for Asia is 1.6 percent compared with a global average of 2,8 percent and 3,5 percent in Germany.

Insurers have to find the right balance of supporting countries as they tackle natural disaster risk and their own sound risk management. “There is increasing appetite from governments around the world to transfer some of the risks instead of relying only on traditional ex-post financing,” said Reto Schnarwiler, Head of Americas EMEA, Swiss Re Global Partnerships. “This will help diversify sources of funding, secure immediate access to funds, increase budget and planning certainty and avoid that funds are diverted from investment plans.” (siehe POLITICS) (vwh)

Stuart Collins is financial journalist and editor specialising in insurance, reinsurance and risk management.

Bild: Aceh nach dem Tsunami (Quelle: / Wikipedia – CC BY 2.0)

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