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INTERVIEW-Insurance know-how can help cities cut disaster risk - UN expert
May 16, 2017 / 11:01 AM / 7 months ago

INTERVIEW-Insurance know-how can help cities cut disaster risk - UN expert

LONDON, May 16 (Thomson Reuters Foundation) - When torrential rain inundated Copenhagen in 2011, within a few hours city officials realised they needed to be better prepared for the next once-in-a-century downpour, to prevent a steep rise in damage claims and insurance payouts.

Although the Danish capital had some disaster plans in place, the flooding caused 1 billion euros ($1.09 billion) in damages, according to insurers, and crippled the city for days.

Working closely with insurance companies and other partners, Copenhagen developed a strategy to make the city greener and use its parks, squares and streets to channel excess water rather than relying on walls, barriers and underground tunnels.

Its award-winning “Cloudburst Management Plan” is just one example of how cities are getting smarter at preparing for disasters, said Butch Bacani, head of U.N. Environment’s Principles for Sustainable Insurance Initiative (PSI).

Although the insurance industry plays a big part in paying out for losses, which helps urban households and businesses cope after a disaster, its ability to support cities in protecting themselves from threats is often overlooked, he said.

“There is a lot of risk management expertise in the sector that cities can benefit from but it has been largely contained within the industry itself,” Bacani told the Thomson Reuters Foundation at the Resilient Cities conference in Bonn this month.

Launched in 2012 and built around four principles, the PSI is a global framework for the insurance industry to address environmental, social and governance risks.

More than 100 signatories have adopted the principles, including insurers representing more than 20 percent of world premium volume and $14 trillion in assets under management.

The number of disasters affecting cities is expected to rise amid climate change and rapid urbanisation, particularly in Africa and Asia, which will see the share of the global population living in urban areas rise to two-thirds from just over half at present.

Globally, 80 percent of the largest cities are vulnerable to severe earthquakes, and 60 percent are at risk from tsunamis and storm surges, according to U.N. data.

Bacani said insurers can help cities cut their risk, for example, by improving land-use planning and building codes, and by rewarding disaster preparedness through their premiums.

“Linking risk reduction efforts to premiums and insurance coverage is critical to changing behaviour and promoting good risk management in urban areas,” he said.

Over the past few decades, insurers have developed more sophisticated catastrophe risk modelling techniques and detailed weather modelling technologies to assess exposure and vulnerability to disasters, said Bacani.

In an example of collaboration, insurance giant Swiss Re and French water and waste group Veolia announced a joint plan last year to install a flood prevention system in the U.S. city of New Orleans which was devastated by Hurricane Katrina in 2005.

BUSINESS AT RISK

Flooding alone accounted for 47 percent of all weather-related disasters between 1995 and 2015, affecting 2.3 billion people, the vast majority of them in Asia, the U.N. says.

Many city businesses are recognising they are under threat from flooding and other disasters, but not enough of them are moving to protect their staff and assets, said Bacani.

A 2015 global survey by French insurer AXA in collaboration with the PSI showed 59 percent of small and medium-size enterprises (SMEs) had been affected by climate change.

Even though 78 percent said they believed the effects of global warming posed a long-term risk, only a quarter had implemented plans to deal with it.

“That’s a major opportunity for the insurance industry to step forward to advise SMEs on how to assess climate risks and support them in the development of resilience plans,” Bacani said.

$1 = 0.9142 euros Reporting by Astrid Zweynert @azweynert, editing by Megan Rowling; Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women's rights, trafficking, property rights, climate change and resilience. Visit news.trust.org

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