Kathmandu. Insured assets accounted for only 7 per cent of natural disaster losses in the Asia-Pacific region over the past two decades.
This is according to a report released by the Organization for Economic Co-operation and Development (OECD). In addition, more than half of the countries in the Asia-Pacific region have covered less than 5% of the damage. In particular, the scope of earthquake insurance is low.
Natural disasters, including floods, earthquakes and cyclones, cost emerging and developing Asia-Pacific countries an average of $48.4 billion annually from 2000 to 2023. The flood damage is 46 percent.
The damage caused by natural disasters has increased by 165 percent in the region in the past two decades. Weather-related damage increased from $10.8 billion between 2000 and 2004 to $42.4 billion between 2019 and 2023.
This gap in insurance protection places a heavy burden on households and businesses, slows economic recovery and puts pressure on public finances. The increasing frequency and severity of outbreaks are expected to widen the gap and drive premiums higher. As a result, coverage will be less affordable.
The major factors on the insurance demand side include low risk awareness, misinformation about coverage requirements, dependence on government disaster assistance, lack of trust in insurance companies, and affordability issues.
In many countries, coverage for natural disasters is sold as an optional addition rather than included in standard property policies. Because of this, people are reluctant to buy it. In Indonesia, for example, less than 5 percent of households with property insurance purchase alternative flood coverage.
On the supply side, premiums are determined by risk assessment, reinsurance costs, distribution expenses and regulatory pricing frameworks.
Despite some progress, the loss of insured assets as a share of economic losses is expected to increase from 2.6 percent from 2000 to 2009 to 6.6 percent from 2014 to 2023.
