UN Natural Disaster Report Highlights Need for Major Rethink Around Risk
The recent release of the latest edition of the United Nations Global Assessment Report on Disaster Risk Reduction (UNDRR) made for grim reading. According to its findings, the world is currently experiencing more frequent and more devastating natural disasters than ever before – and the situation is only likely to deteriorate further as a result of human-induced climate change.
While refusing to sugarcoat the grim reality of the situation, the report highlights a number of practical steps aimed at building resilience to natural disasters through mitigation measures and pre-empting risk. As well as focusing on addressing the staggering global insurance gap, the report argues that deploying technology for greater climate adaptation and better mitigation can significantly reduce the future impacts of natural disasters.
Natural disasters on the increase
The main takeaway from the report is that extreme weather events are likely to intensify and become more commonplace in the coming years. The available figures support this assessment: the number of natural disasters, around 400 a year in 2015, is projected to rise to 560 annually by 2030.
What’s more, a recent report from the Intergovernmental Panel on Climate Change (IPCC) predicts that a 1.5°C hike in global temperatures will arrive during the 2030s, a whole decade earlier than previously believed. Nowhere is expected to bear the brunt of this environmental upheaval more than south-eastern and central Asia, where 19 of the world’s 25 cities most vulnerable to rising sea levels are concentrated.
Meanwhile, the economic and public health effects of climate change-related calamities are already being heavily felt. The Asia-Pacific region loses 1.6% of its GDP to natural disasters each year, which is far above the 0.1% to 0.3% in losses experienced by most developed countries. China alone lost $25 billion and more than 2,300 lives to major floods in 2021, while this year India experienced the hottest March temperatures in 122 years.
Adequate insurance and reinsurance can provide safety net
To make matters worse, many countries are grossly unprepared for the fallout from natural disasters—including the economic ramifications. This lacuna was highlighted in the UNDRR report, which called upon countries across the globe to implement measures to mitigate the infrastructural and fiscal impact of future calamities.
Despite escalating disaster risk, many countries lack widespread insurance coverage. In fact, only $120 billion of the $280 billion that is estimated to have been lost globally to natural disasters last year was insured, according to German insurance giant Munich Re. The problem is even more pronounced in Asia, where the insurance gap stands at 83%, compared to a global average of 57%. In China, for example, just 10% of those aforementioned $25 billion losses were insured.
Analysis by Munich Re also predicts that increased insurance coverage will inevitably spark a knock-on demand for sufficient reinsurance—insurance which covers the risks incurred by primary insurers—to protect against potential losses, with the sector projected to see a rise in premium prices and attract growing investments.
Indeed, the reinsurance market has already started catching the attention of investors, with two particularly noteworthy deals materializing in the last couple of months alone. Just last month, for instance, French insurance giant Covéa was given the European Commission’s green light to buy up Italian-owned reinsurer Partner Re for a reported $9 billion. The deal was concluded on similar terms to the recent acquisition of U.S.-based conglomerate Alleghany—which has a core position in the reinsurance sector—by Berkshire Hathaway, the multinational firm headed by Warren Buffett, a man known for his prolific skills in anticipating market trends and backing winners on the stock market.
Adaptation and innovation key to mitigation
Of course, comprehensive insurance is a necessary step towards mitigating the effects of increased climate change risk but not a panacea. Countries must equally devote resources towards risk assessment, anticipation, and prevention. Indeed, disaster prevention has so far been neglected, with over 90% of disaster funding going towards emergency response and just 4.1% to prevention and preparedness. This must change if the world is to successfully adapt to the new climatic challenges. Innovation can be particularly useful in this respect, as cutting-edge tech is already proving valuable for countries determined to anticipate and better protect themselves against extreme weather events.
For instance, the United Nations Development Program (UNDP) has provided targeted climate resilience relief in Uzbekistan, a country which often faces the threat of severe droughts. Through a $5.2 million project spanning five years, the UNDP initiative uses improved soil conservation techniques to slash water consumption by 20%, boost crop yields by 20% for households and as much as 50% for commercial farmers.
Similarly, high-tech initiatives are also being put to good use in China, Japan, and South Korea, where remote sensing technology and real-time data collection create an early warning system against natural disasters. It is innovative and forward-thinking approaches like these which will help equip the world’s most vulnerable populations with the tools they need to anticipate adversity before it arises, put in place measures to limit its damage, and build back stronger than before. At the same time, increasing awareness about the importance of adequate insurance coverage is imperative to offset the growing risk of financial losses from natural calamities.
As such, the most recent publication of the UNDRR report not only reveals the stark facts about the current predicament facing the world, but it also outlines a compelling case for how approaching risk differently could help to overcome it, with insurance, adaptation, and mitigation efforts at the forefront of any successful strategy. It now falls to governments, businesses, and other stakeholders to heed the warnings and implement the measures necessary to make sure that the worst-case scenarios never come to pass.