Asia Pacific Losses US$65 Billion In Economy Due To Natural Disasters

(Photo : Getty Images/SAEED KHAN)

A recent study said natural disasters cost the Asia-Pacific region an estimated US$65 billion in economic damages last year, primarily from China's disastrous floods and India's drought.

Economic Loss Due to Natural Disaster

Aon, an insurance company that conducted the study, identified roughly 400 natural disasters in 2023, the hottest year on record, ranging from floods to droughts, cyclones, and wildfires.

It estimated the total damage at US$380 billion, a 7% rise from the previous year. Natural catastrophes are significant climate events that result in at least $50 million in losses, 10 deaths, or 50 injuries.

According to the research, floods were the most costly threat in Asia-Pacific for the fourth consecutive year, accounting for more than 64% of total losses in 2023. Annual flood losses have surpassed $30 billion since 2010.

China incurred the greatest losses in Asia-Pacific, with $32.2 billion in flood-related losses, accounting for more than half of overall regional losses.

Throughout the year, Hong Kong, South Korea, India, and Pakistan all experienced substantial flooding and record rains.

The South Asia floods, in particular, claimed approximately 2,900 lives. Aon stated that flood-related losses had totaled more than $30 billion every year since 2010.

The report also mentioned rising temperatures and unexpected heatwaves, particularly drought conditions in China and India. Aon stated that despite heatwaves being among the "deadliest perils, these risks have traditionally been a blind spot in the insurance industry."

The insurance also stated that big earthquakes contributed to increased damage, following shocks in Afghanistan's Herat Province in October and China's Gansu Province in December, which killed almost 1,500 people and damaged over 200,000 dwellings, respectively.

"With climate driving new extreme weather records, businesses increasingly need to quantify and address the direct and indirect impact of climate risk," said George Attard, CEO of Reinsurance Solutions for Aon's Asia Pacific region.

Although climate change is not often mentioned as one of the top ten hazards to organizations, he believes it has a direct impact on four important areas: business interruption, shifting market trends, supply chain disruptions, and regulatory changes.

Insurance Gap Coverage

While the Asia Pacific accounted for just about 17% of total global losses, it also had the biggest insurance coverage gap, with 91% of disaster-related losses uninsured.

This was much higher than the global average of 69%, according to a report. Aon discovered that insured losses in the Asia-Pacific totaled only US$6 billion.

No region outside of the United States came close to matching this level of coverage, with Asia-Pacific, Latin America, Europe, the Middle East, and Africa all insuring only 17 percent or less of their losses. Turkey and China saw the highest uninsured losses, followed by the United States, Italy, Mexico, Brazil, and Argentina.

The report noted that while population-dense areas tended to have better investment in infrastructure and insurance coverage, significant urban growth "can lead to unforeseen risks, especially when it comes to unprecedented weather events," citing Hong Kong's "black rain" floods in September as an example.

The city was paralyzed by 16 hours of torrential rain, resulting in millions of dollars in damage, including flooded subway stations, stores, and streets, and prompting criticism of the government's disaster planning procedures.

A similar report released last month by reinsurance company Swiss Re estimated that insured disaster-related losses might treble within the next decade as temperatures rise and extreme weather events become more frequent and severe, making risk reduction even more important.