Tsunami in South Asia: Building financial protection
How should the insurance industry respond to tsunamis and other natural catastrophes occurring in developing countries?
A basic concept of insurance is to cover financial losses in the event of a catastrophe. For the recent tsunami in the Indian Ocean, however, the insured losses are marginal in relation to the magnitude of the disaster due to the low insurance density in the affected regions.
While we cannot control the forces of nature, we are at least able to reduce their impact. If the technical prerequisites for insurance are met, the high loss potentials of extreme natural disasters – including tsunamis – are insurable throughout the world with certain reservations.
The greatest obstacle to making large-scale and sustainable provision for the future is the lack of people’s appreciation for the dangers at hand – not only in the developing countries. In the industrialised nations, too, the risk of natural disasters tends to be underestimated or ignored.
Tsunamis will always be a threat, but there are proven tools for coping with them. Today, the aim must be to deploy these tools to the greater advantage of all concerned. Reinsurance can make an important contribution in this respect.
