The Global Insurance Resilience Gap

March 17, 2023

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The popularity around utilizing resilience as a risk management tool is growing. Resilience can be defined as reducing the impact of a disturbance. When facing natural catastrophes, insurance is an important technique that is used to help us rebuild. Resilience is the ability to “bounce back.”

Unfortunately, the property insurance market has experienced 21 straight quarters of price increases with no clear end in sight. As pricing continues to increase, it’s evident the uptick in intensity & frequency of natural catastrophes are on their way.  

Withstand Shock Events
As a result, we are seeing a widening in the Global Insurance Resilience Gap, a Macro Economic index, that measures a country or region’s ability to withstand shock events over time. This index measures:

  • Mortality (life insurance)
  • Health (medical coverage)
  • Natural Catastrophe on a global basis (P&C insurance)

According to Swiss Re, their Natural Catastrophe Resilience Index measured assets that are exposed to natural catastrophes such as floods, windstorms, and earthquakes is at 25%. This means 75% of global exposures are left uninsured.  

Turkey’s Earthquake
A recent disaster, of epic proportions, hit the southeastern part of Turkey, proving the severity of this problem. The region was rocked by earthquakes that hit 7.5 and 7.8 on the Richter Scale. The seismic activity continued as there over 7,500 aftershocks, with several of those registering close to a magnitude of 6.0. 

From a property damage standpoint, the World Bank estimated the economic cost based on the direct damage of this catastrophe to be $34 billion, roughly equivalent to 4% of Turkey’s GDP. As the Turkish economy becomes clearer, the cost will likely double. 

Scientists suggested that the region sat on a potentially dangerous fault line. However, buildings were built bypassing codes, thereby exacerbating the damage to the area. Roughly only 15% of the $34 billion were insured losses. Without the benefit of insurance proceeds, it will only take longer for the region to bounce back.

How are you handling your CAT exposed risks? Do you have the proper insurance in place to minimize your risks? Reach out to TSIB to learn how you can protect your next project. 

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Topics: Construction Risk Management

Written by The TSIB Team

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