Building resilience to climate events, devastating storms

The Philippines is the world's most exposed country to tropical storms. It sits across the typhoon belt, battered by dangerous storms for four to six months a year. Around 20 tropical cyclones enter the Philippine Area of Responsibility each year – ten are likely typhoons and five having great destructive potential.

As climate change exacerbates extreme weather – raising ocean temperatures, powering tropical storms with vast energy, the country is constantly challenged to build resilience towards the damaging impact these weather events have on its economy and people's lives.

The deadliest storm to hit the Philippines in recent history was Typhoon Haiyan (Yolanda), which struck across central Philippines in November 2013 and destroyed 4 million homes. A category-5 storm with winds up to 315 km/h, the typhoon hit the Philippines at near-peak strength, leveling the city of Tacloban and triggering a massive storm surge that flooded the city. An estimated 7,500 people died or went missing and total damage amounted to USD2.2 billion1.

Applying Lessons from History

Five years later, Typhoon Mangkhut (Ompong) the third-strongest tropical cyclone worldwide in 2018, made landfall in the Philippines – but the total damages were a fraction of those after Typhoon Haiyan.

After Haiyan, the government has gotten better at responding to natural catastrophes, applying lessons learned to mitigate the effects of Mangkhut. It has resulted in fewer fatalities, which the National Disaster Risk Reduction and Management Council estimated at 127 deaths, and total damages of USD 627 million2.  

A category-5 storm with winds up to 270 km/h, the Typhoon Mangkhut struck the island of Luzon on 15 September 2018, before heading across the South China Sea towards Hong Kong and China.

An important lesson that was learned from earlier disasters was the need for earlier and more emphatic advice to people to seek refuge. The Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) was tracking Typhoon Mangkhut well before it reached Luzon, raising warning signals as early as 13 September, and evacuations were carried out. Medical and emergency response teams were placed on standby and over USD 30 million worth of relief goods were prepared3.  Prior to that, announcements were made on 12 September to suspend school sessions in preparation for the approaching typhoon.

The effectiveness with which the Philippines has mitigated the impact of Typhoon Mangkhut is a continuation of active efforts to improve preparedness in the country. In July 2018, President Rodrigo Duterte recognized the country's need to strengthen resilience and announced the creation of a new ministry, the Department of Disaster Resilience. Taking this one step further, the Philippines doubled its parametric natural catastrophe insurance cover at USD 390 million in a renewal intermediated by the World Bank in December 20184. Designed to facilitate rapid payouts and disbursement of capital as soon as after catastrophes strike, the program provides insurance cover against major typhoon and earthquake events for 25 provinces in the Philippines.

A Stronger Role for Public Private Partnership

The heightened frequency of extreme weather events such as typhoons, torrential rains, and flooding, due to warming temperatures is a reality worldwide, but the public sector does not need to shoulder the burden of disaster risk management alone.

Globally, the combined economic loss total for the two years was USD 497 billion, of which USD 280 billion was uninsured. The insurance industry can help society to tackle these risks and as Swiss Re Institute's recent sigma report reveals, there is plenty of capacity to go around. In 2017 and 2018, insurance claims for losses arising from natural catastrophe events used up only around 11% of total non-life insurance capital, which is estimated to be more than USD 2 trillion.

Having the right insurance measures can help governments mitigate the impact climate change levies on its people and economy. The sigma analysis showed that more than 60% of the pay-outs were made to help impacted populations manage the fallout from torrential rains, landslides and storm surge-induced flooding. A new approach to pay more attention to such risks can spell opportunities to deploy capacity more effectively and close the protection gap.

For instance, parametric covers for perils related to extreme weather can help governments and people realize the value of insurance by nature of their relatively frequent nature. In China, provincial governments are increasingly using insurance instruments to finance disaster relief programmes or to re-build public infrastructure. Soon after Typhoon Mangkhut landed in Guangdong, the local insurance regulator announced that the province's parametric catastrophe index insurance facility was triggered, which provided payouts to support recovery efforts.

There are ways to alleviate both the impacts and costs of natural catastrophes by planning, where insurance plays a critical role in effective disaster risk management helping communities get back on their feet faster. Financial preparedness through insurance helps to strengthen people's resilience to natural catastrophes – at the same time, it helps reduce the fiscal burden on governments after a disaster and enables quicker recovery. More can be done with re/insurers working in partnership with the public sector in assessing, pricing and transferring climate risks to provide greater protection, particularly to those who can ill-afford on their own.

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