Global insurance market Lloyd’s of London is calling on businesses and governments across the world urgently to review their disaster-readiness. The call comes as it releases new figures showing a massive shortfall between levels of insurance and the annual cost of catastrophic events in 42 key economies around the world.
The research, commissioned by Lloyd’s and carried out by the Centre for Economic and Business Research (CEBR), reveals for the first time that there is an annual gap of just over $168bn between the minimum levels of cover necessary and the actual levels that businesses and governments have to rebuild and recover following major catastrophes. This comes at a time when natural catastrophe damage is increasing. The research shows that the annual cost of natural catastrophes has increased by $87bn since 1980, at a huge cost to governments, taxpayers and businesses.
The comprehensive study, looking at hundreds of data points over a 10 year period, is the first of its kind and creates a new measure of ‘underinsurance’. It shows:
- 16 countries are dangerously underinsured, while a further 16 have insufficient levels of cover for the disaster risks they face.
- The taxpayer is currently picking up a big proportion of disaster losses across the world. For every 1% increase in a country’s insurance, taxpayer liability can drop by as much as 22 percentage points1
- The largest single gap is China which insured just 1.4% of the losses incurred between 2004 and 2011, meaning it has been uninsured to the tune of $208bn over the last seven years.
Eight countries are expected to face losses totalling more than 0.5% of GDP in 2013, including Chile, China and New Zealand.
1 Based on evidence from five in-depth case studies of natural catastrophes in the UK, Thailand, China, the US and Japan.