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Storm exposures: The changing landscape in Asia

Losses across Asia are expected to rise exponentially in future with 80% of the top 10 exposed locations to coastal flooding from storm surge and wind damage expected to be in this region in the next 50 years.


> Read the full risk bulletin 'Hurricane Katrina 10 - Catastrophe management and global windstorm peril review'

The Northwest Pacific Ocean is the most active basin on the planet generating an average of 26 tropical storms per year compared with 11 in the Atlantic. 2013 saw the most active Pacific typhoon season in almost 10 years with 16 typhoons developing and tropical storm Haiyan being the deadliest on record to hit the Philippines. Even though the 2014 season was not as active and costly as the one that preceded it, it still contained Typhoon Rammasun, which made landfall in Southeast China as the strongest typhoon to hit the region since 1973 - a Category 4 storm on the Saffir-Simpson scale. Increasing assets and a booming population clustered around tropical storm hotspots in the face of intensifying storm activity means the potential for larger windstorm losses across Asia continues to increase.

Ten years ago the top 10 cities in terms of assets exposed were Miami, Greater New York, New Orleans, Osaka-Kobe, Tokyo, Amsterdam, Rotterdam, Nagoya, Tampa-St Petersburg and Virginia Beach, according to a global screening study by the OECD [1] which made a first estimate of the exposure of the world’s large port cities (136 in total) to coastal flooding due to storm surge and damage due to high winds. These cities contain 60% of the total exposure, but are from only three countries: US, Japan and the Netherlands.

Based on the study’s projection for 2070 – the exposure landscape looks very different with asset exposure forecast to grow dramatically, reaching $35,000bn by the 2070s; more than 10 times the level in 2005 and rising to roughly 9% of projected global GDP in this period.

Top 10 cities ranked by assets exposure to coastal flooding in the 2070s ($USbn)
/assets/Infographics/Hurricane%20Katrina/AGCSAnalysisTop10CitiesRankedByAssetsExposure_large.jpg (click on image to enlarge)

Drivers of exposure growth

Population growth, socio-economic growth and urbanization are the most important drivers of the overall increase in exposure. Exposure rises most rapidly in developing countries, as development moves increasingly into areas of high and rising flood risk. A study by the Texas A&M and Yale Universities found that by 2030 the amount of developed low-elevation coastal land in China will have increased by over 60,000sqkm since 2000. [2]

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[1] OECD Ranking Port Cities with High Exposure and Vulnerability to Climate Extremes
[2]
www.allianzre.com/Allianzre/Press_Page/BusinessNews/2014/Windstorms_A_Rising_Threats.html


Significantly, as the map on page 1 shows, Asian cities account for 80% of the top 10 exposed locations in 2070. In 1950 there were just two conurbations of at least 10 million people – New York and Tokyo. Today, there are 28, 15 of them in Asia.[3] Statistics forecast that the population in Asia is set to double by 2050 – particularly in urban coastal areas. An increase in prosperity also means the number of people defined as “middle class” is expected to double between 2009 and 2020. And future increases in income are likely to double tropical cyclone damage even without the impact of climate change according to a 2012 report on The Impact of Climate Change on Global Tropical Cyclone Damage, published in Nature. [4]

Underinsurance a major issue

The situation is exacerbated by the fact that growth of exposures is far outpacing take-up of insurance coverage, resulting in a growing gap in natural catastrophe – including windstorm - preparedness and response. For example, Haiyan is the costliest tropical storm event in Asia by overall losses ($10.5bn) in the past 35 years. However, only approximately $700m of this was insured. “Historically, hurricanes such as Katrina and winter storms such as Gudrun – both in 2005 – affecting the US and Europe have represented the greatest risk to AGCS,” says Richard Quill, Catastrophe Risk Management, AGCS.

/assets/Infographics/Hurricane%20Katrina/AsiaTyphoonHaiyan_471x120.png

One of eight ships washed ashore at Anibong District, Tacloban City during Typhoon Haiyan. Haiyan is the costliest tropical storm event in Asia in the past 35 years ($10.5bn). Photo: Wikimedia Commons.

“However, as the company has entered and expanded in growth markets, windstorm activity in other regions around the world have become more a focus point; most notably in the Asian markets including in particular India, China, South Korea and the Philippines.

“The impact of global warming on windstorm activity is continuously being studied to determine the changes in the occurrence and intensity of events – both in the offshore regions and on-land. There are still multiple challenges regarding risk assessment for windstorms. Sound underwriting will be required to best manage any potential future changes in risk landscape.”

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[3] United Nations World Urbanization Prospects, 2005 and 2014 revisions
[4] www.nature.com/nclimate/journal/v2/n3/full/nclimate1357.html