Increasing insured as well as economic losses show how susceptible modern societies are to the impact of nat cats

Superstorm Sandy

In June this year, extreme flooding devastated large areas in the eastern part of Germany, the Czech Republic, Austria, Hungary and Slovakia. The weather preceding the flooding had been wet in the region, and May 2013 had been one of the three wettest in the last 156 years in Austria. According to a Swiss Re estimate, the total estimated economic loss amounts to over $16bn – in Germany only. Of these, only $2.7bn were insured losses. Interestingly, those areas and cities that had taken preventative measures, such as Dresden and Prague, were significantly less affected.

But the insured as well as economic loss numbers show us how susceptible modern societies, also in Europe, are to the impact of natural catastrophes. Swiss Re recently published a research piece called “Mind the Risk” which ranked the natural catastrophe risk faced by 616 urban areas worldwide in terms of potential human and economic costs. Asian cities were found to be the most exposed, but Amsterdam-Rotterdam and Hamburg ranked among the top cities under threat from storm surges. For winter storms, London assumes the top spot in Europe. In terms of the estimated value lost in working days in relation to the national economy after an unusually strong storm surge, Amsterdam-Rotterdam even came first globally: more than five million people would potentially be affected in such an event, a number which comprises fatalities, injuries and evacuations.

Just a few months before, a Swiss Re survey established that residents of catastrophe-exposed areas in the US are generally well aware of the dangers from natural catastrophes. The Risk Perception Survey asked more than 20,000 people around the world to rate the risks they faced, from whole countries as well as specific metropolitan areas. Dutch respondents whose neighbourhood had already been hit by a natural catastrophe were those rating the risk of being hit again by such an event third-highest in the world (out of 19), only after Indonesia and Australia which were severely and repeatedly hit in the past decade. But only a small minority of Dutch rated the risk-reduction measures taken by the government or local authority as “very good”.

(Re)insurers can play a role here and consider how societies can respond differently – how to build defences against natural catastrophes, and how people can get back on their feet quickly after disasters strike. Swiss Re is doing its part, not only by sharing its research and information with the public as in the surveys and studies mentioned above, but by taking that knowledge and applying it for positive change. For this reason Swiss Re has joined with the Clinton Global Initiative (CGI) to build resilience in at least 100 cities. Through the initiative, the 100 Resilient Cities Centennial Challenge aims to hire a chief resilience officer (CRO) for each candidate city. The CRO will be empowered to create a resilience strategy and make use of a range of tools, technical support, and resources for implementation of that strategy – including access to innovative finance for infrastructure development.

While natural catastrophes caused average economic losses of $60–100bn annually, a single large-scale disaster in the heart of a big metropolitan centre can surpass this figure significantly. Recent events showed how real the risk is in some of the world’s most populated regions.

A CRO can concentrate attention on the measures needed to protect his or her city from extreme weather, seismic events or terrorism. And why the focus on cities? Because by 2050 an estimated 75% of the world’s population will live in them – making urban resilience an imperative of the 21st century. When disaster strikes cities are affected on a larger scale because of population density, often with tragic results. This is particularly true of the poor and vulnerable. Through planning, foresight and better investment, cities can dramatically mitigate these impacts.

Jean-Jacques Henchoz, chief executive, reinsurance EMEA, Swiss Re