By SHAWN CUMBERBATCH From Nation News

Should Barbados and the region be more focused on disaster risk insurance?

This is best illustrated by the negative impacts the region has had from storms and hurricanes over the years. The increasing prevalence of earthquakes, and the threats from flooding and landslides also demonstrates that there is a need for preparation in the region.

Prior to the establishment of the Caribbean Catastrophe Risk Insurance Facility (CCRIF) in 2007, countries had to depend on their own finances or from the support of various donor agencies. And even though the CCRIF exists, it is only able to cover some of the financial losses.

With the onset of climate change, the Caribbean is expected to be faced with even more events that will require money to recover.

Such problems are not unique to the Caribbean. Two weeks ago, Swiss Reinsurance Company Ltd (Swiss Re), the world’s second largest reinsurer, released figures which showed the extent of the challenge.

The company, which is based in Zurich, Switzerland, said insurance and reinsurance industry losses from natural catastrophes and man-made disaster events during 2016 were expected to be about US$49 billion. Compared to 2015, this was a 33 per cent increase, but slightly below the ten-year average.

Natural catastrophe events accounted for US$150 billion of the global economic loss in 2016 and US$42 billion of the insurance and reinsurance loss, which is significantly higher than the US$28 billion of insured catastrophe losses seen in 2015, but still below the ten-year average of US$46 billion, Swiss Re reported.

It added that man-made disaster losses caused an additional US$7 billion of insurance claims, down from US$9 billion in 2015.

Swiss Re also said the gap between total losses and the amount covered by insurance and reinsurance remained wide, highlighting the much-discussed protection gap, as economic losses from natural catastrophe and man-made disaster events in 2016 reached US$158 billion, an increase of 68 per cent on 2015’s figure.

Swiss Re also said natural catastrophes were the major source of both economic and insured losses in 2016, with earthquakes and flooding the leading causes.

Of note for the Caribbean, which has been warned to prepare for more significant earthquakes, Swiss Re said there was a major gap between the economic costs of recent major earthquakes and the actual insurance coverage.

Swiss Re chief economist Kurt Karl said: “Society is underinsured against earthquake risk. And the protection gap is a global concern.

“For example, Italy is the eighth largest economy in the world, yet only one per cent of homes in Italy are insured against earthquake risk. Most of the reconstruction cost burden of this year’s quakes there will fall on households and society at large.”

The Kumamoto, Japan earthquakes, which were the largest single loss event of 2016, resulted in an economic cost of around US$20 billion but with just US$5 billion covered by insurance and reinsurance.

Also, the central Italy earthquakes in August were thought to have caused over US$5 billion of economic loss, but insurance may only pay for a paltry US$70 million of this loss, largely from coverage of commercial assets.

Earlier this year, another major reinsurer, Munich Reinsurance Company, reported that “losses caused by natural catastrophes in the first half of 2016 were significantly higher than the corresponding figures for the previous year”.

“In total, losses by the end of June came to US$70 billion (previous year US$59 billion), of which US$27 billion  were insured. The main loss drivers were powerful earthquakes in Japan and Ecuador, storms in Europe and the US, and forest fires in Canada,” it added.

One of the German company’s board members, Torsten Jeworrek, said: “These events clearly show the importance of loss prevention, such as protection against flash floods or the construction of earthquake-resistant buildings in high-risk areas. The good news is that improved building codes and a more intelligent approach by emergency services and authorities offer people much better protection than used to be the case.”

Speaking in April this year, as the European Union contributed US$15.8 million to CCRIF, World Bank vice-president for Latin America and the Caribbean, Jorge Familiar, said: “For small economies, tackling climate and disaster risks effectively requires efforts at the regional level, since effective solutions call for risk pooling.

“This is critical for Caribbean and Central American countries that are increasingly vulnerable to the effects of climate change.”

– See more at: http://www.nationnews.com/nationnews/news/91816/issue-disaster-risks-outweigh-cover#sthash.lConY07z.dpuf