September 9, 2020
The report, titled “Optimizing Disaster Recovery: The Role of Insurance Capital in Improving Economic Resilience”, also outlines the growing economic impact of natural disasters over the past three to four decades. It notes that annual average loss from such catastrophes rose from an average of USD 27 billion in 1970-1980 to nearly USD 200 billion in 2010-2019, driven by global economic development and the increasing value of assets in hazardous areas, particularly in fast-growing regions such as Southeast Asia.
Commenting on the report, AXA XL Reinsurance Chief Underwriting Officer Jonathan Gale, who spearheaded the report’s sponsorship and wrote the Foreword, said: “Putting communities impacted by disasters back on their feet as quickly as possible, and in a better state, is just one example of how we make AXA’s purpose to ‘act for Human Progress by protecting what matters’ a reality. The case for (re)insurance is clear but is seldom adequately explained. We wanted to bring out comparative information related to speed of recovery – how quickly employment and productivity returns to normal (economic) and how quickly people are back in their houses and power is restored (societal). We also wanted to focus on the quality of recovery, that is whether the post-disaster normal is better than the pre-disaster state in terms of the economy and the resilience of the community to future events from the perspective of infrastructure and economic resilience.
“This report shows pre-disaster financing (predominantly (re)insurance) with the ability to channel significant funds instantly and without recourse as the single biggest solution to catastrophic events.”
Professor of Operations Research at Cambridge Judge Business School and Academic Director of CCRS Daniel Ralph said: “This project provides much needed quantification of resilience and recovery after natural catastrophes, as much of the ‘evidence’ to date has only been anecdotal. With climate change events, including floods and storms, increasing in frequency, it is more important than ever to understand the levers of recovery for communities and companies.
“The report looks mostly at vulnerable communities, but there also are clearly lessons for corporates in terms of preparing for catastrophe, investing in ways to recover more quickly, and more effective decision-making and implementation if disaster strikes. Assessing the impact of surprises requires effort in delineating the kinds of surprises that are possible, and then stress testing your organisation across the gamut of those events – stress-testing via scenarios is the key to planning for surprise.”
AXA XL Reinsurance held a virtual media briefing event yesterday where CCRS Chief Scientist Andrew Coburn and Environmental & Climate Risk Lead Oliver Carpenter joined Andrew MacFarlane, who leads AXA XL’s Public Sector Partnership Working Group, in discussing and answering questions about the comprehensive report. The report is the culmination of a multiyear series of disaster recovery studies, as part of work to understand the insurance protection gap, undertaken by CCRS in collaboration with AXA XL Reinsurance over the past decade.
The next phase of AXA XL Reinsurance’s work with CCRS will involve developing an online database that will be accessible worldwide and contain the research to date and over time expanding the database with additional case studies and related information.