Every time there is a major natural catastrophe somewhere in the world, losses are measured in several terms. First and foremost there is the human cost. While the loss of life may eventually be measured in a number, the suffering is incalculable. The events in the Philippines are a humanitarian disaster.
Then there is the economic loss, with current estimates running to around $12 to $15 billion for Super Typhoon Haiyan. And then there is also the insured loss. That number is usually much lower—in this case, probably drastically so. Insured losses in the Philippines are estimated to be around just 10% to 15% of the economic loss.
By comparison, insured losses for Hurricane Sandy’s attack on the U.S. in October 2012 were around 50%. That’s a big part of why some industry commentators are saying that Haiyan will have a bigger impact on the Philippine economy than Sandy did on the U.S.
The closer the insured loss is to the economic loss, the more effective insurance will be in helping survivors recover. That support cannot take away the loss and the suffering, but it can significantly improve the chances of recovery by enabling construction and trade to step in more quickly. This in turn bolsters jobs and the wider economy.
The Philippines is no stranger to natural disasters. Its losses from typhoons and earthquakes are the highest in Southeast Asia with an average of $1.6 billion annually, according to the Asian Development Bank.
We can’t prevent tragedy, but we can help build resilience and a stronger recovery. The Philippine Government’s plans to spend heavily on infrastructure in the coming years are a step in the right direction, but are not a cure-all. Risk management and disaster planning also need to be bolstered.
Photo credit: NASA/NOAA infrared image of the eye of Typhoon Haiyan
Guest blogger Adam Garrard is Chief Executive Officer for Asia, based in Singapore. Previously he was Willis’ CEO for Continental Europe and has also held other roles with Willis in Asia and Australasia.