A senior broker in the Philippines reflects on the devastation wrought by super typhoon Haiyan and the implications for the Philippines' government and insurance industry.
Super Typhoon Haiyan, locally known in the Philippines as Yolanda, struck the province of Visayas in the morning of 8 November packing sustained winds up to 195 mph making it the strongest typhoon ever to make landfall.
As of 9 December, the National Disaster Risk Reduction and Management Council reports that the death toll is 5 934, with 1 779 still missing. The cost of the damage is in excess of $720m.The Philippines' vulnerability to natural disaster is high. In a 2011 report by the United Nations, they ranked the country to be among the top in this category.
Consider this: first, the country is in the path of 20 typhoons annually wherein an average of six to nine makes landfall and usually taking place on the 3rd quarter of the year; and, secondly, being in the Ring of Fire, the country is prone to earthquakes and volcanic eruptions.
Financial exposure
The financial exposure versus the GDP is also very high. In a study by the Asian Development Bank based on 2011 statistics, earthquakes and typhoons ranked one and two respectively in terms of the costliest hazards. Based on nominal 2011 GDP of $224.8bn:
Hazard type GDP cost Exposed Country Ranking
Earthquake $114.74bn 9th of 153Typhoon $19.24bn 6th of 89
The area hit by Yolanda accounts for only 2.2% of the GDP. If it struck Metro Manila and its neighboring region, exposure will amount to 60% of the GDP.
One would expect the government and its agencies are perpetually prepared for disaster risk reduction and management. Unfortunately, the Haiyan incident reveals otherwise. In retrospect, it took about three to four days after Yolanda made landfall for the government to put in effect relief operations including search, rescue, and retrieval. The havoc stunned the nation. It brought seven meters of storm surges destroying almost all of Tacloban City but it was its strong winds that wiped-out almost anything and everything in its path.
Herculean task
Immediate relief was said to be a herculean task considering that the areas devastated are not fully developed under a third world setting. The worst hit Tacloban City has one provincial airport which was severely damaged. Portions of the highway from the airport leading to the city have one lane only on each side of traffic and this highway was blocked by all sorts of debris (natural and man-made.)
There was no emergency manpower available, and some were missing or attending to lost loved ones and lost properties. The severely damaged telecommunications infrastructure further aggravated relief operations.
The government needs to be more serious with its effort in disaster risk reduction. In October, the province of Bohol which is located in Central Visayas was struck by a magnitude 7.2 earthquake claiming many lives and properties. The government needs to initiate and execute urban planning, and move people further inland from the coastal areas to mitigate loss of lives and properties in times of storm surges caused by typhoons and tsunamis caused by earthquakes.
Global warming
As global warming and the ensuing climate change is expected to yield more frequent and stronger typhoons, more people are becoming aware of the necessity of insurance. The industry is well advised to capitalise on this opportunity to generate awareness among the insuring public. Micro insurance has been already initiated to make protection more affordable.
In 2012, the Asian Development Bank supported the development of an earthquake pool to augment the country's high exposure. This will involve a multi-sectoral group involving the government, local insurers, international insurance & reinsurance come 2015. With the expected increase in frequency and strength of typhoons, in addition, it would be prudent to develop a typhoon pool.
Source - http://www.insuranceinsight.com/
