Asia's cities at risk

Asia is becoming urbanized – much more rapidly than Europe and America did in the past. According to data from the United Nations, there were some 230 million people living in Asia's cities in 1950; by 2050, that figure is forecast to grow to nearly 3.5 billion. However, infrastructure expansion cannot keep pace with the increasing needs of the population. With the need for more space, the growing population is also moving into the paths of the intensifying volatile weather. This imbalance makes cities extremely vulnerable to natural disasters.

To compound the issue, risk assessment is difficult due to the lack of statistics and information on the threat of natural disasters, on the location and construction of buildings and industrial complexes, as well as on crisis management and preventive measures.

Cities like Beijing, Delhi, Jakarta, Manila, Mumbai, Shanghai and Taipei are all situated in earthquake zones. They are also at risk from flooding and/or typhoons. In the Philippines, for instance, 62 of the 79 provinces are regularly hit by tropical cyclones, with devastating consequences. In comparison to the United States, Asia is 590 times more vulnerable to earthquakes, 62 times more vulnerable to flooding, and 40 times more vulnerable to tropical cyclones. Hence, Asia stands to lose much more in natural disasters.

The choice of building materials, regulations for earthquake-proof buildings and their enforcement (or lack of), antiquated and inadequate sewage systems – these are just a few of the factors that can widen the impact of natural events in conurbations. Sometimes, sheer bad luck also plays a part: When Typhoon Nari hit Taipei in 2001 at a relatively low wind speed, it caused damage to the tune of 500 million US dollars. The heavy rainfall flooded the subway network after the pumping system failed. The main traffic arteries in and out of the capital were paralysed for weeks.

Climate change could further exacerbate the situation in Asia. Some scientists believe that rising sea levels could turn millions of people into environmental refugees. That, in turn, would intensify migration pressure on cities – increasing their vulnerability to natural disasters.

The question then is this: What should the insurance industry base its risk models on, in the face of the lack of information?

The Indian government, for instance, has admitted that it cannot supervise the construction of every building. Thus, there is a lack of data not only on old buildings that were erected before the introduction of stricter regulations, but also on an unknown number of new ones.

In Asia therefore, cat risk models are subject to certain limitations.

At the moment, the insurance industry in Asia is only minimally affected by natural disasters. That could soon change, as the concentration of insured assets will rapidly increase. In order to avoid nasty surprises, insurers need a detailed overview of the situation in each city. Without meaningful information on insured property, the infrastructure in which they are embedded and without mitigation mechanisms, insurers are in great danger of setting too low an estimate on potential future losses.

In order to estimate risk scenarios and risk susceptibility, a tightly knit data network in which all information is collected should serve as basis for setting risk parameters. Such a database would not only be invaluable to the insurance industry; it would also be extremely useful for Asia's city planners by helping them detect weak points in urban systems.

Climate change is not the main culprit, but ignoring global warming will risk an increasing exposure and therefore insured losses will escalate.

 
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