The human and economic costs of natural disasters can be considerable. Each year hundreds of billions of dollars of economic damage follows from a range of disasters, with the severity and frequency of such disasters projected to increase as climate disruption starts to become more prevalent.
One area hit particularly hard in 2015 is India’s Chennai area, Aon’s analysis shows, where $3 billion in economic losses have already been booked.
insurance cover in the region has been relatively low however and only 10% of the losses were covered.
The effect of natural disasters can be devastating for the people near their epicentre. From the levelling of cities from earth quakes, to their inundation from floods – people and their livelihoods remain vulnerable to acts of nature.
Rapidly changing climate conditions are projected to see an increase in the severity and frequency of natural disasters on people around the world in the future, with failure to adapt one of humanity’s greatest existential risks in the coming decade.
The economic costs to repair and reconstruct lives following disasters can run from thousands to tens of billions. The damage costs of the 2011 Tōhoku earthquake and tsunami, for instance, are estimated at $300 billion.
Hurricane Katrina is believed to have cost $108 billion in economic damage and $45 billion in insurance cover pay-outs, while Tropical Storm Nock-ten caused an estimated $45.7 billion in economic damages in Thailand.
Each month, Aon delivers an analysis of the most sever global natural disasters and their estimated costs.
These reports, titled ‘Global Catastrophe Recap’, place the interim in which the disaster took place, the event, the location and the human and economic costs of the disaster.
One area highlighted by the latest report has been the effects of the current El Niño conditions on flooding within southern India and Sri Lanka.
The weather pattern has seen torrential rainfall in the areas for a sustained number of weeks between November and early December.
As a result, more than 386 people have died. The states Tamil Nadu and Andhra Pradesh, and particularly the Chennai metropolitan region in India, were severely impacted by the event.
Economic losses from the event are expected to reach $3 billion. The event highlights considerable issues across a range of areas for India.
According to Adityam Krovvidi, Aon’s Head of Impact Forecasting in the Asia Pacific region, the poorly designed infrastructure with only maximisation of economic effects in mind was partly to blame for the high cost of the disaster.
A further issue is that insurance cover remains low in India; only around 10% of the disaster’s total costs are covered.
“Risk assessment can play a major role in awareness and insurance in mitigating the financial hardships.
The large gap between the economic and insured loss from the Chennai flood event further emphasises the need for greater insurance penetration in large industrialised cities in Asia,” says Krovvidi.
“This will become even more important as Asian megacities continue to grow and the risk of major urban flood events increases.”
Helping out financially
In response to the flooding, IT consultancy Cognizant has offered more than 40 million in donations, with $10 million to help some of the more than 2 million people displaced by the event, and $30 million to help bring life back to normal.
Other disasters listed in the report include the continued drought in the US West region which has cost around $4.5 billion so far this year.
Europe’s most sever event took place at the start of the year, when the windstorm cost an estimated $650 million.
The UK has also seen its fair share of flooding, and several consulting practices have been helping to bolster defences in recent years.