Development of risk assessment tools needed to address Asia risks

Mr Ryrie’s warning comes just as the Asia Pacific region has witnessed one of its worst ever natural disasters in Japan—both in terms of the damage inflicted and the financial cost to the country and the insurance industry. The insurance industry in Asia is usually only minimally affected by natural disasters, due to take up of insurance and the low density of large urban areas. But that could soon change, added Mr Ryrie, who points out that the concentration of insured assets will rapidly increase as populations grow and the industrial revolution in the region continues its march. The situation in Asia is likely to be particularly acute in the future, continues Mr Ryrie, as the infrastructure and information needed to expand populations and industry in a coherent and risk-mitigated fashion are lacking. hideWithout meaningful information on insured property, the infrastructure in which they are embedded and without mitigation mechanisms, insurers are in great danger of setting too low an estimate on potential future losses, said Mr Ryrie. In order to estimate risk scenarios and risk susceptibility, Mr Ryrie has called on the insurance industry and other stakeholders to pool their resources and build a tightly knit data network in which all information is collected. It should serve as the basis for setting risk parameters, the reinsurer explained. “Such a database would not only be invaluable to the insurance industry; it would also be extremely useful for Asia's city planners by helping them detect weak points in urban systems,” he said. While scientists across the globe argue about climate change and its effects on weather-related disasters, insurers struggle to assess the risks it brings. Adding to the risks is the increasing urbanisation, which is especially acute in Asia. “The costs of such disasters in Asia's metropolises are likely to rise in the future,” warned Mr Ryrie. “Unless managed proactively and soon, the potential extent of damage and the repercussions on the population would be significant in Asia's urban centres. And while insurance density continues to grow, thanks to greater prosperity, we need to further develop information standards and risk assessment tools.” Asia’s urbanisation is proceeding at a much greater rate than was the case in Europe and America in the past. According to data from the United Nations, there were some 230 million people living in Asia's cities in 1950; by 2050, that figure is forecast to grow to nearly 3.5 billion. However, infrastructure expansion cannot keep pace with the increasing needs of the population, warned Mr Ryrie. And with the need for more space, the growing population is also moving into the paths of the intensifying volatile weather, he added. “This imbalance makes cities extremely vulnerable to natural disasters.” To compound the issue, risk assessment is difficult in Asia due to a lack of statistics and information on the threat of natural disasters. This is the case for the location and construction of buildings and industrial complexes, as well as on crisis management and preventive measures. Cities like Beijing, Delhi, Jakarta, Manila, Mumbai, Shanghai and Taipei are all situated in earthquake zones. They are also at risk from flooding and typhoons. According to figures given by Mr Ryrie, in the Philippines, for instance, 62 of the 79 provinces are regularly hit by tropical cyclones, with devastating consequences. In comparison to the US, Asia is 590 times more vulnerable to earthquakes, 62 times more vulnerable to flooding, and 40 times more vulnerable to tropical cyclones. Climate change could further exacerbate the situation in Asia, continued Mr Ryrie. Some scientists believe that rising sea levels could turn millions of people into environmental refugees. That, in turn, would intensify migration pressure on cities—increasing their vulnerability to natural disasters. So whilst acknowledging the insurance industry faces questions about where and how it should collect information on which to base its risk models, Mr Ryrie has called for it to combine all known data within one industry-wide accessible database. Despite these concerns Allianz Asia Pacific itself recorded 20.7% growth in 2010, which is reflective of the uptake of insurance in the region and the push by major global players to enter its insurance market. Profitability grew by 46% with improvements in both life insurance and property and casualty insurance business. Premium intake in its P&C business grew to €1.1bn in 2010, up from 841m in 2009. This is an increase of 14%. The strongest contributors to growth were India with a 23% increase in premiums and Malaysia, where premiums grew by 10%. The region-wide combined ratio remained at 97.3%.

Development of risk assessment tools needed to address Asia risks

Want to read this article?

Read Next

Over 50% of exporters considering moving supply chains due to geopolitical risk

New carbon capture and storage insurance product from Aon

Nordics come top in global cyber security poll

EU strengthens CO2 emission standards for heavy-duty vehicles

Italian credit insurer opens office in Singapore

Over 50% of exporters considering moving supply chains due to geopolitical risk

New carbon capture and storage insurance product from Aon

Nordics come top in global cyber security poll

EU strengthens CO2 emission standards for heavy-duty vehicles

Italian credit insurer opens office in Singapore

Want to read this article?

Read Next

Over 50% of exporters considering moving supply chains due to geopolitical risk

New carbon capture and storage insurance product from Aon

Nordics come top in global cyber security poll

EU strengthens CO2 emission standards for heavy-duty vehicles

Italian credit insurer opens office in Singapore

Related Articles