Is it possible to reduce losses caused by natural disasters?
Times of crisis, such as the one we are experiencing now with COVID-19, remind us of the importance of prevention to mitigate losses. This particular virus and its wide-ranging effects were not expected, but how would societies have acted if they had known what was coming?
Every year there are natural events that cause damages around the world, for which the economic loss can be mitigated. According to the United Nations Office for the Coordination of Humanitarian Affairs (OCHA), Latin America and the Caribbean is the second most disaster-prone region around the globe. Floods are the most common natural disaster in this part of the world, followed by hurricanes, earthquakes, fires, and droughts.
Year after year the Swiss Re Institute studies the impact of natural catastrophes and man-made disasters around the world. The 2019 sigma report on this topic, shows that there is a higher exposure of the population to these types of dangers, magnified by climate change, because of urbanization and economic growth. Latin America and the Caribbean are among the most urbanized areas having 81% urban population.
Higher average temperatures, rising sea levels, longer heatwaves, and uneven rainfalls registered increases and most of the catastrophes were caused by recurring events linked to extreme weather during the last year. Secondary perils such as droughts, wildfires, and floods have shown to be more hazardous and will continue to be even more dangerous.
In the past year, according to the natural catastrophes report developed by the Swiss Re Institute, there were USD 137 billion of economic losses due to these kinds of events, which outpaced the insured losses of USD 52 billion. For Latin America and the Caribbean this represents USD 11.9 billion of economic losses from which USD 5.2 billion were insured losses.
As reinsurers we are taking measures to reduce climate change now and equally to address the protection gap. The case of Hurricane Dorian in the Bahamas, which was the costliest disaster in the country, is only an example of the extreme weather conditions that are affecting the region nowadays.
We have the responsibility to consider doing transformations in the way we measure and prevent natural catastrophes in the industry, but most importantly, we need to work with other industries and institutions to reduce the uncertainties and threats of global climate change and thus strengthen protection to make the world more resilient.
I believe that we can develop transcendental solutions through collaboration with clients, private and public institutions, and governments. The proof is that during past years, where terrible catastrophes such as earthquakes or floods hit countries like Chile, Mexico, or Brazil, working together was the best way to overcome difficulties.
I firmly believe it is possible to reduce losses caused by natural disasters taking preventive actions today as opposed to reacting after the crisis has hit us.