Developing Asia “urgently” needs to build more resilience to natural catastrophes through better planning, setting aside government budget, and encouraging insurance, according to new research by the Asian Development Bank (ADB).
A mere 8% of Asia’s catastrophe losses since 1980 have been covered be re/insurance, the ADB noted in its economic publication, the Asian Development Outlook (ADO) 2019.
This is despite rapid urbanisation in many regions and the threat of increasing catastrophes due to climate change, alongside the fact that Asia is already disproportionately impacted by natural disasters.
“Four out of every five people affected by natural hazards live in Asia,” said ADB Chief Economist Mr. Yasuyuki Sawada.
“Asia has led the way on disaster risk reduction efforts in recent years, but more action is needed to tackle both vulnerability and responses at the national and the community level,” he continued.
The ADB urged countries to consider increased use of credit and insurance to build disaster resilience, particularly through the use of risk transfer products and re/insurance.
More programs have begun to offer insurance coverage across developing Asia over recent years, with new studies showing that two-thirds of them now offer micro-insurance to cover agriculture losses, although over 80% depend on subsidies or other financial support.
While traditional indemnity insurance models are difficult to scale down to the needs of individual households in poor communities, more innovative models such as index-based risk-transfer products offer potential, the ADB said, and government and international support for reinsurance allows for broader pooling of risk.
“The benefits of insurance are clear: pooling risk to preserve human welfare, facilitating investment by containing risk, and making post-disaster support more predictable,” the ADB stated.
It also noted that rapid rebuilding often takes precedence after disasters, but recommended swift recovery be considered alongside other objectives, such as strengthening resilience to future hazards, helping vulnerable segments of society, and restoring the economic and social dynamisms to impacted areas.
Key to this is collaboration among central and local government, non-government organisations, as well as the affected communities themselves, who are the first port of call for support and local knowledge after disasters strike.
“Governments should continue to integrate disaster risk reduction into broader development policies and public investment strategies,” the ADB reported.
“Spending on disaster prevention continues to lag far behind disaster response as access to credit, insurance, and remittances remains sparse and uneven. Immediate humanitarian response could be better coordinated. Managing disaster risk can enhance equity, resilience, and sustainability.”