2014 sigma event: containing the growing cost of catastrophes

Average insurance losses from natural and man-made catastrophes were lower in 2013 than in previous years. But floods and storms in Europe and Asia showed us the heavy toll that disasters can take on human life and property. As the stakes continue to rise, how can we minimise the risks? At this year's sigma natcat event, we looked at some of the options.

26,000 lives lost and USD 140 billion in financial damage – this is the fallout from the 308 catastrophes that hit us last year. As staggering as these numbers may appear, 2013 actually saw fewer deaths and lower economic costs compared to the annual global average of the last ten years. But flooding and hailstorms led to record-breaking losses in Europe and Canada, while Typhoon Haiyan resulted in an unprecedented humanitarian crisis for the Philippines.

These events highlight an ongoing trend: natural catastrophes are responsible for more human casualties and higher financial losses than ever before, particularly in densely populated and unprotected locations. This is driven by the fact that more people are living in hazard-prone areas, cities are expanding rapidly and climate change is contributing to more erratic weather patterns. As a result, a growing number of people and assets will be put in harm's way.

Making the most of models

In the face of this mounting challenge, the insurance industry is looking for ways to better assess and respond to disaster and climate risk. At this year's conference on sigma: natural catastrophes and man-made disasters 2013, much of the discussion was devoted to sharing the latest insights on risk and risk mitigation strategies.

While the insurance industry has some of the most sophisticated risk models, it's how we use and apply them locally that will make the difference on the ground. A key theme of the day's discussions was therefore the importance of making societies and governments more aware of the risks they face, as well as making our risk expertise more widely available to a broader public.

Keeping the focus on climate change

Climate change is another issue that received special attention at the event and was featured prominently in this year's edition of sigma. The evidence presented in the latest report by the UN Intergovernmental Panel on Climate Change (IPCC) shows that greenhouse gas emissions from human activity are contributing to a changing climate, and this is likely to lead to more severe weather extremes and rising losses in the future.

The lesson from all this for the insurance industry, as well as governments and society at large, is clear: together, we have a greater chance of tackling the challenges of tomorrow than individually, as uncertain as they may be. And although we may never know everything, we already know enough to not do anything.

The takeaway

What resonated with participants? And what will they take back to their daily lives? Find out in the video below.


Published 4 April 2014

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