Deforestation is a man-made disaster

Natural disasters 2019 accounted for

At the moment the world is in a corona stranglehold and does not like to worry about other natural disasters yet. But what does the global natural disaster balance look like in 2019?

© depositphotos, Zenobillis

Worldwide economic losses from natural disasters ($ 137 billion) and man-made disasters ($ 9 billion) totaled $ 146 billion last year (2018: $ 176 billion). This is the result of the latest Sigma study 2/2020 “Natural disasters in times of economic accumulation and risks of climate change” by the Swiss Re Institute. The latest numbers are below the 10-year average of $ 212 billion. The global insurance industry covered $ 60 billion in losses (2018: $ 93 billion).

Main driver of severe weather events

Severe weather events were the main driver of the overall losses in 2019. Swiss Re assumes that economic development and the ever-increasing population concentration in urban centers, as well as climate change, will further increase losses due to weather events in the future. Your industry could play a key role in working with customers and governments to develop solutions that would support the transition to a low-carbon world; Renewable energy projects are mentioned.

The biggest industry loss events of 2019 occurred in densely populated and developed parts of Japan: Typhoon Faxai in September (insured losses of $ 7 billion); followed by Typhoon Hagibis in October (additional insured losses of USD 8 billion).

Immediate action is the order of the day

According to the study, economic development and the expansion of the population lead to changes in land use, which lead, for example, to deforestation and the construction of floodplains and the interface between wildlands and cities. Another variable is the extent of the risk mitigation infrastructure such as flood barriers and sea defenses. All of this influences the extent of the losses caused by extreme weather events and other natural disasters.

It is difficult to quantify the exact impact of rising temperatures on specific weather-related disasters, but climate change is a threat that requires immediate action due to its serious impact on human life and the global economy, said Jerome Jean Haegeli, chief economist of the group at Swiss Re .

The effects of climate change are already visible and include rising sea levels, longer and more frequent heat waves and irregular rainfall patterns, as Swiss Re writes. Warm temperatures would likely lead to an increased frequency of extreme weather events, the report said. The harmful effects manifested themselves mainly in secondary hazards, as has become clear in each of the last three years. In 2019 in particular, the rains caused by Typhoon Hagibis, the storm surges caused by Cyclone Idai in Mozambique and the monsoon rains in Southeast Asia, as well as other weather systems, caused economic and humanitarian damage. Record high temperatures in eastern Australia caused forest fires to burn over millions of acres of bushland in the longest forest fires the country has ever seen.

Weather risks remain insurable

Overall, the Swiss Re Institute is of the opinion that weather risks can still be insured with adaptation measures. According to the reinsurer, the insurance industry needs to adapt to a dynamic risk landscape by carefully modeling socio-economic developments, the latest scientific research on the effects of climate change and the status of local risk mitigation measures. Many of today's disaster models are compared to historical loss data that do not reflect current levels of urbanization and therefore do not fully take into account today's rapidly increasing exposures, changing socio-economic environment and climate, as it is also said.

"To maintain the insurance risk transfer model as a powerful resilience tool, insurers need to adapt before and not after events," said Martin Bertogg, Head of Catastrophe Perils at Swiss Re. “To this end, insurers should be wary of historical damage records in order to understand the current state of the socio-economic environment and climate. Averaging over several decades can lead to a distorted risk assessment. "

Typhoon Hagibis is a typical example. Japan has always been exposed to high typhoon risk, and with huge investments in coastal and inland flood protection following the devastating typhoon events of the 1950s and 1960s, the reinsurance industry would have seen the flood risk in Japan largely reduced. However, most of the USD 8 billion insured damage from Typhoon Hagibis came from flooding and, due to urban development since the mid-20th century, Tokyo was not prepared for the level of physical damage, as Swiss Re points out.

"While the flood protection in parts of the greater Tokyo area prevented major devastation, at least 55 dike breaches and overflowing rivers showed that the risk of water flooding is only partially reduced," said Bertogg. "The flood protection has mitigated the effects, but by no means completely."

The English version of Sigma 2/2020 “Natural disasters in times of economic accumulation and risks of climate change” is available for download.