Asian insurers and regulators need to work harder and smarter to make sure nations are better equipped to financially handle natural disasters, a financial regulator has said.
“Insurance can and should play a bigger role to reduce the financial impact of natural disasters and improve disaster resilience,” said
Ravi Menon, managing director of the Monetary Authority of Singapore (
MAS).
In the past 20 years, Asia has contributed almost half of the world’s economic losses from natural catastrophes, at more than US$900 billion, but less than 5% of the losses were insured in developing Asian economies. In contrast, in developed countries, 40% of the losses were usually insured.
“We must put in place mechanisms for the effective assessment, management, and transfer of disaster risks. Advances in technology, innovation, research, and market integration put us in a strong position to address these challenges,” Menon said yesterday when he spoke at the Institute of Catastrophe Risk Management (ICRM) Symposium.
He said there were four key factors the industry needed to stay on top of: technology and data, production innovation, research and development, and an interested ASEAN market, reports Channel News Asia.
Insurance cover against natural disasters has not been able to keep up with the rapid economic growth in the region, creating a massive catastrophe protection gap, he said.
The insurance industry must innovate and promote the spread of new insurance solutions, such as index-based or parametric insurance, he added. These products make payouts based on pre-defined natural conditions, removing the need for loss adjusters to conduct inspections and delivering monetary relief immediately to those affected by a disaster.
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