For Victor Kuk, head of Client Markets for P&C reinsurance business in SID for Swiss Re, (comprising Southeast Asia, India, Korea, Hong Kong and Taiwan), the issue of urbanisation is a pressing one for the world and its (re)insurers.
“In Asia, post-Covid we are seeing the ongoing development of economies, and with it, there has come a definite move toward greater urbanisation,” he explains. “We are seeing a movement to the cities and this is placing greater demands on authorities around planning.”
As such, he adds, efforts by local authorities across the world to expand cities are creating the temptation to build on land, which comes with new risks, and in particular, flooding.
“We have seen this year the extensive flooding in Australia, which has resulted in losses of over $5 billion, and we are seeing those risks in Asia as well,” explains Kuk. “Urbanisation is a real risk for the region and for its (re)insurers. The greater use of concrete is impacting the ability for water to be dissipated, increasing the flood risk.”
He says a major issue has been that, with greater understanding of risk, planners have become more emboldened in their schemes to meet the accommodation needs of the population, which is gravitating to major cities.
“For us as an industry, we need to be upgrading our models to take into account the changes in frequency and severity. It opens up the discussion around what solutions we can offer. What we need to achieve is a real understanding for the customer and what they can and need to do to mitigate the risks that they face. It is very much about having the debate around sustainability.”
“Policy and mitigation need to translate into an understanding in the entire community as to the risks they face and the steps needed,” he adds. “We need a response across the entire value chain.”
“If that is achieved, we can then better manage the planning and delivery. It also means we can better manage those risks.”
Kuk continues that the solution has to start with the planning authorities:
“There is a point where we can provide modelling output where there is significant involvement. The planning agencies can do a lot better, and a range of areas need to be considered in decision making. What is clear is we need to be embedded into the overall process. We have the experience with natural catastrophes, we know where the exposures are and the likely losses.”
“We can look to support planners in understanding the risks, the hotspots and the benefits of the use of more sustainable design and materials.”
Kuk says that the threat from climate change will only increase the need for the industry to play a bigger role in working with authorities to address the risks that will come with the move towards larger cities, many of which are in coastal locations, which in Asia come with increased natural peril risks.
While there is capacity for natural perils, Kuk recognises that the price needs to be adequate for the risks assumed, as the growing global population will place demands on developing nations across the world.
While sub-Saharan Africa is seen as the region which will drive future population growth, we cannot ignore natural catastrophe risk. For example, Pakistan and the Philippines have both been hard hit by natural perils in the past 12 months and are seen as nations that will undergo rapid population growth, alongside India, which is set to become the world’s most populous nation in the coming years.
Kuk says the (re)insurance market will have a huge role to play in supporting nations as they look to create the cities and urban centres of the future as they balance the need for homes and businesses with the economic cost of development against the new risks such expansions will create.
He adds that to play its part properly, the industry cannot become involved simply when the claims occur, rather from the outset when the plans have not been transferred from the drawing board.
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