(Destruction in the city of Tacloban, Philippines, wrought by Typhoon Haiyan in Nov. 2013. Image Source: Henry Donati, U.K. Department for International Development.)

Today at the Third World Conference on Disaster Risk Reduction, in Sendai, Japan, AIR Worldwide (Boston) and the United Nations office for disaster risk reduction (UNISDR) shared initial results of a global study on economic catastrophe losses to explore whether the perception that severity of catastrophes was increasing was justified by the facts. The study’s preliminary findings indicate that, while the raw cost of disasters has increased, loss results normalized for factors related to economic growth demonstrate no significant trend (see graphic below).

The AIR/ UNISDR study examines the trend of growing economic losses from global natural catastrophes by looking at 30 years of historical events and then normalizing these losses based on today’s conditions including changes in population, wealth, and urbanization of catastrophe prone areas.

“We have seen an unmitigated growth of economic losses due to disasters over the years,” comments Jerry Velasquez, coordinator of UNISDR’s Making Cities Resilient Campaign. “However, priority strategies needed to address this growth in losses are still not clear. What this study provides is better understanding of what these priorities could be.”

Increasing Insurance Losses

The insurance industry has also seen an increase in the cost of natural disasters, and taken at face value these increasing losses present new challenges for disaster-risk management, according to Caroline McMullan, research associate, AIR Worldwide, writing at AIR’s blog. “However, disaster risk is driven by a plethora of factors, including population, wealth, land use and demographics,” she writes. “Add into the mix natural variability in the frequency and severity of events, anthropogenic climate change, and the implementation of resilience policies, and it becomes clear that disaster-risk management is a complex and challenging field.”

(Related: Gen Re Selects AIR’s Touchstone Risk Management Platform)

“Although global catastrophe losses are trending upwards over the past decades, much of this can be attributed to population and wealth growth, and an increase in properties being built in areas of high catastrophe risk, such as coastlines,” comments Dr. Milan Simic, managing director of international operations, AIR Worldwide. “We’re an ideal partner for this project because of our extensive experience working with and normalizing catastrophe losses for insurance purposes, which can be expanded to include in-depth analysis of resulting economic losses from all natural perils, across the globe.”