The frequency and severity of natural disasters such as floods, droughts and hurricanes are expected to change as the climate changes and past experiences are useful to help guide recovery efforts.
The frequency and severity of natural disasters such as floods, droughts and hurricanes are expected to change as the climate changes and past experiences are useful to help guide recovery efforts. A new online Disaster Recovery Hub comprised of more than 100 major disaster case studies, and covering different events in different locations, has been launched by the Cambridge Centre for Risk Studies at Cambridge Judge Business School in partnership with AXA XL to help with such guidance.
The Cambridge Centre for Risk Studies Disaster Recovery Hub (the “Hub”) includes data visualisations and other tools to assess the role the insurance industry can play in helping communities impacted by disasters get back on their feet as quickly as possible.
The variety of case studies in the Hub range from the floods in Bangladesh in 2004 to the Kashmir earthquake in Pakistan in 2005 to Superstorm Sandy in the US in 2012 to the Germany floods of 2013, and typhoons in the Philippines and Vietnam in 2013 and 2017, respectively. While most of the case studies are from the past 30 years, the Hub also contains older case studies, including the Ohio River flood of 1937 in the US and the Ashgabat Earthquake of 1948 in Turkmenistan.
The Hub shows that the Bangladesh floods and Superstorm Sandy, which in both cases had damage severity levels (i.e., the proportion of the building and infrastructure value lost from the event) between 60% to 80%, had very different recovery profiles. For example, the Bangladesh floods, where the proportion of insured loss was only 0.05%, had an economic recovery speed of 6 to 11 months and the economic recovery quality was worse than before the disaster; whereas Superstorm Sandy, where the proportion of insured loss was 46%, had an economic recovery speed of less than 6 months and the economic recovery quality was the same as before the disaster.
Graphs included in the Hub include a comparison of economic and societal recovery speed, and the quality of recovery in terms of the economy, amenities, and safety. There are also statistics covering a variety of data in the Hub, such as the types of disasters (flood, tsunami, earthquake, storm), income group, and insurance penetration.
The Hub draws on a recent 21-page report by the Cambridge Centre for Risk Studies in partnership with AXA XL, entitled Optimising Disaster Recovery, that reflects years of research into how disaster recovery has been tackled around the world. The Report highlights that the global annual average loss from natural disasters has risen from $27 billion during 1970-80 to nearly $200 billion during 2010-2019, driven mostly by global economic development and the rising value of assets in hazardous areas, particularly in fast-growing regions such as Southeast Asia.
The Report includes some facts that particularly stand out. For example, each percentage point increase in insurance penetration reduces recovery times by almost 12 months; disasters in regions and countries with high insurance penetration, such as Western Europe, Japan, and Australia, have an average recovery time of less than 12 months, while such events in countries with very low insurance penetration, such as Haiti and the Philippines, have an average recovery time of more than four years.
“The gap between well managed and badly managed disasters is striking and, unfortunately, it is always the poorer communities who bear the brunt, be it in developed or emerging economies,” said Jonathan Gale, Chief Underwriting Officer - Reinsurance, AXA XL, in the Foreword to the Report.
“Climate Risk is at the heart of this study, and it is important to remember that risk is a function of hazard, exposure, and vulnerability,” he added. “Changes in Climate Risk are not just driven by a changing hazard; understanding exposure change and the vulnerability of that exposure as values and wealth builds in cities, particularly in emerging economies, is critical to understanding the ever-increasing gap between economic loss and insured loss.”
Oliver Carpenter, Environmental Risk Research Lead at the Cambridge Centre for Risk Studies, added: “We hope the new Cambridge Centre for Risk Studies Disaster Recovery Hub will prove an invaluable tool to public officials, companies, NGOs and others who play a role in disaster recovery efforts. The assembled case studies provide contrasting narratives of success and failure in recovering quickly from catastrophes and building disaster resilience, and clearly outlines the important role played by insurance in these endeavours.”