The earthquake that struck Haiti last month caused catastrophic damage and loss of life, decimating an already impoverished country. But despite extremely low levels of insurance there, the industry has an important role to play in reconstruction
International aid is pouring into Haiti, a country ravaged by destruction and loss of life on an unimaginable scale.
While such a disaster would trigger huge payouts elsewhere in the world, insurance levels in Haiti are extremely low and the international insurance industry might wonder whether it has a role to play there at all.
While no official figures exist, the Haitian market for non-life insurance is estimated at a mere $19m.
Meanwhile, the biggest single insurance payout for Haiti is likely to be the sum it receives from CCRIF (the Caribbean Catastrophe Risk Insurance Facility). Yet even this is only $8m – a figure based on an annual premium of about $300,000.
Dr Simon Young of CCRIF said that while the payout is small in relation to its needs, it is of relatively higher value than in-kind aid and is likely to be used to pay government salaries.
“We certainly anticipate that the CCRIF members will revisit their quake coverage and we hope that many will be able to find the premium to increase their overall coverage, which for most countries is still only covering a quite limited part of their overall exposure,” Dr Young says.
AIR Worldwide senior research engineer Dr Guillermo Franco says that the damage and loss of life in Port-au-Prince was made worse by the quality of the buildings. “The building inventory in Haiti is dominated by concrete block [unreinforced masonry] construction, which has minimal lateral reinforcement.”
He adds: “Vulnerability is further exacerbated by Haiti’s poverty; residential construction, in particular, is of poor quality. In addition, Port-au-Prince, which is home to more than two million of Haiti’s estimated population of 10 million, is situated on steep hills, which increases the chance of ground failure in the form of landslides. Indeed, Haiti is a mountainous country, which has
been severely affected by years of deforestation, and landslides are quite likely to have occurred throughout the country as a result of this event.”
The scientists’ view
Experts from a Los Angeles-based research company are playing a key role in the response to the Haiti earthquake. Supported by their European office in London, the company ImageCat is working around the clock to provide an accurate and comprehensive assessment of the extent of the devastation. The work is being funded by the World Bank and the Global Facility of Disaster Reduction and Recovery.
Using satellite imagery, the team has already studied the impact in the Port-au-Prince region, an area about the size of Washington, DC, and to date has identified more than 5,000 buildings that have collapsed or been destroyed. Its next task is to highlight key facilities for the reconstruction programme, paying special attention to schools, roads and bridges that the World Bank has earmarked for special funding.
In order to produce the most accurate data, ImageCat is co-ordinating a network of scientists and engineers from Cambridge and Southampton universities, University College London, the University of British Columbia, and the State University of New York at Buffalo. This involves studying ‘before’ and ‘after’ imagery to validate the actual damage. Buildings without roofs before the earthquake, for example, can appear to be destroyed buildings in the after imagery. The data, once aggregated, gives a full understanding of the wider picture and the result takes the form of a virtual disaster viewer, accessible via the internet.
Back on the ground, the horrors in Port-au-Prince continue beyond the aftershocks. Medical care, food distribution, temporary housing and civil unrest are among the short-term concerns for international agencies carrying out relief operations.
Longer term, international financiers led by the World Bank and the US government are planning far ahead with regard to financing for Haiti’s reconstruction programme. The US government has also pledged $100m towards rebuilding.
It is in this area that the international insurance industry will have a key role as a catalyst to achieving sustainable financing, building standards and property coverage in the future.
“The international reinsurance industry in particular will be of assistance in providing risk transfer capacity for the huge investments that will be made over the coming years in rebuilding Haiti,” Dr Young adds.
“That investment is going into a cat-exposed area and at least some of that cat risk will need to be transferred away from the project funding.”
CCRIF will be contributing in several other ways, including the use of a storm forecasting system and a new rainfall model, both of which are critical to flood and landslide modelling.
“Our regional hazard and risk model can form the basis of developing better hazard maps for Haiti, and heighten awareness of all hazards as rebuilding gets under way,” Dr Young explains.
Clearly, it will take a great deal of time, investment and expertise to rebuild this devastated nation, but the opportunity is there for the industry to play its part in that. GR