Category Archives: Disaster Risk Reduction

Spread the Word on Building Resilience for Vulnerable Communities

It was off to another prestigious London venue last week for the RMS team, to attend the Insurance Post British Insurance Awards at the Royal Albert Hall. In addition to fulfilling lifelong dreams to see Rick Astley perform live, the RMS team was also competing for the Risk and Resilience Award, alongside four other very worthy contenders. And, first presentation of the night, I was delighted to represent RMS to collect this important award.

This award recognized our longstanding charity partner Build Change, who we have worked together with for six years. Both organizations share a mission: to reduce lives lost from disasters by strengthening the built environment in economically deprived areas.

By combining RMS’ risk modeling expertise and institutional support with Build Change’s technical knowledge and grassroots approach, we’ve been able to demonstrate that retrofitting buildings, from homes to schools, in vulnerable neighborhoods across the globe can significantly reduce economic loss and save lives. And one of our many collaborations was an initiative to greatly improve the safety of seismically-vulnerable communities in Colombia.

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The Value of Flood Protection: Quantifying the Benefits of Defenses Along U.K. Rivers

Whenever the U.K. is hit by major flooding, attention quickly turns to the performance of the nation’s flood defenses. Some defenses, such as London’s Thames Barrier, are regularly recognized for their vital role in protecting people and property. The value of other mitigation measures, however, has been frequently challenged, such as when defenses failed to prevent significant flooding in Cumbria during storm Desmond in 2015.

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The Disappearing Tokyo Risk Audit

Without the ability to measure, how do we know if we are making progress?

In December 2012, in preparation for the renewal of the UN Millennium Development Goals, I wrote a report for the U.K. Government Department for International Development (DFID) advocating that catastrophe models should be used to measure progress in disaster risk reduction. I suggested goals could be set to target a 50 percent reduction in expected casualties and a 20 percent reduction in normalized economic losses, over the period of a decade, based on the output of a catastrophe model.

Two years later, the seven targets agreed at the UN meeting on Disaster Risk Reduction, held on March 14–18, 2015, in Sendai, Japan – were a disappointment. The first two targets for “Disaster Mortality” and “Affected People” would simply compare data from 2020-2030 with 2005-2015. The third target was to “reduce direct disaster economic loss in relation to global GDP by 2030”. Yet we know, especially for casualties – even at a global level, a decade is not enough to define a stable mean. For cities and countries, comparing two decades of data will generate spurious conclusions.

And so, it was a relief to see that only two weeks later, the Japanese and Tokyo city governments announced they had set themselves the challenge of halving earthquake casualties over a decade, measured by modeling a hypothetical event based on the M7 1855 Edo earthquake under Tokyo. I referenced this announcement and quoted it widely in presentations, to highlight that risk modeling had been embraced by the country with the most advanced policies for disaster risk reduction.

Over the last two years, I started searching for some update on this initiative. What kind of progress in risk reduction was being achieved, whether the targets for Tokyo would be met? And I found my original links had all stopped connecting. Perhaps in my enthusiasm I had dreamt it?

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Impact Trek: Living (and Thriving) in Areas Exposed to Multiple Perils

In March this year, I joined a team of six RMS employees and three clients travelling to Manila in the Philippines on the annual RMS Impact Trek, as part of an ongoing partnership with Build Change. RMS and Build Change share the aim of increasing resiliency and reducing the impact of disasters, especially in the communities that are most vulnerable to their effects. The Philippines is one of the most disaster-prone countries in the world; its position on both the Pacific Ring of Fire and within the western North Pacific tropical cyclone basin means the country is at risk from both earthquakes and typhoons.

Previous Impact Treks had taken participants to Haiti and Nepal – countries which were at the time recovering from the impacts of catastrophic earthquakes. This year was different, in that Manila has not experienced a recent disaster, and the Trek focused on pre-disaster measures that can be taken to increase resiliency and prepare for the next big event when it inevitably occurs.

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Impact Trek: How to Make Millions of Homes More Resilient

Just over a year ago, I was in Manila for a workshop on the design of PCDIP – the Philippines City Disaster Insurance Pool. Recognizing the Philippines as a country prone to earthquakes, typhoons and frequent flooding, as well as having a rapidly increasing economy, population and building stock, the design of PCDIP was funded by the Asian Development Bank and implemented by a consortium of consultants, led by RMS. The aim: to manage the risk that Philippine cities face from natural catastrophes through the use of parametric risk transfer, to give the cities a rapid source of funding when disaster strikes.

In March, I returned to Manila, alongside a team of both RMS colleagues and our clients on the annual RMS Impact Trek with Build Change – a longstanding RMS partner. RMS works closely with Build Change in promoting, and, crucially, implementing risk-reducing retrofit measures in low-income communities around the globe. This time, the focus of the trip was arguably less on risk transfer (as during my last visit to Manila), and more on risk reduction, because effective risk management must always be a combination of both – reduction and transfer.

Transferring risk from the first to the last dollar (or Philippine Peso…) is never efficient from a financial perspective; not to mention the non-financial benefits risk reduction measures can have on the lives and livelihoods of communities. At the same time, risk also cannot be fully “reduced away” – even after the most ambitious risk reduction measures some residual risk will always remain. And this is where risk transfer can provide vital protection, to ensure (or insure?) that adequate financial means are available in response to the most extreme catastrophe events.

During the Impact Trek, we spent a lot of time with the local Build Change team and some of their key partners – microfinance organizations, local and national government, and, most importantly, homeowners.

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Blue Chip Catastrophes

What do the 393 grounded Boeing 737 MAX aircraft have in common with BP’s “Deepwater Horizon” fire and uncontrolled oil release, or with Volkswagen’s (VW) “cheat technology” that ensured its diesel engine cars could pass stringent U.S. and European emissions test standards?

All three situations cost their respective companies tens of billions of dollars. Two of them concerned the development of in-house software that caused more self-inflicted damage to the company’s balance sheet than any corporate hit from an external cyberattack. And all three highlight defective risk management and regulation.

Volkswagen Group, BP and Boeing are all world class companies: ranked #18, #24 and #49 globally in the recently published Forbes Global 2000. For investors these are “blue chip” stocks: “… the stalwarts of industry – safe, stable, profitable and long-lasting companies, they represent safe, low volatility investments.” Investors might prefer to return to the original definition of “blue chip” in poker-playing, where it designates the highest value token but says nothing about the risk.

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Wildfire: Managing a Peak Peril

A new wildfire season looms on the horizon across the United States, and as the last two years of huge wildfire insured losses and extensive devastation to lives and property clearly illustrates, wildfire is no longer an easily manageable loss for the (re)insurance industry – but a new peak peril.

So, what could be in store for the 2019 season? The industry is reeling from back-to-back seasons with losses over US$10 billion. This is unprecedented even during a period when average losses between 2011-2018 were at US$3.7 billion. And looking back, this is up 40x compared to 1964-1990, where losses were below US$100 million in today’s prices. What is changing with this peril, what are the risk drivers that we need to look out for?

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Disaster Risk Reduction: Avoiding the Inevitable

While natural hazards are inevitable, their impact on any given community is not. This is the thrust of the #NoNaturalDisasters campaign.

There’s a truth behind the hashtag. Modern societies are increasingly capable of determining their resilience to natural hazards. We nowadays know enough to prevent extreme weather events from escalating into full-blown disasters. In developed nations, sophisticated forecasting systems, social media networks and engineering capabilities can make any weather-related death seem like pure bad luck.

So, if it’s all down to chance, no particular group in society should be at higher risk. The truth, however, is rather different.

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Data Drives Dividends

In the four years since the adoption of the Sendai Framework for Disaster Risk Reduction, the range of stakeholders taking part in the UN’s biennial Global Platform for Disaster Risk Reduction has broadened significantly. And with good reason.

Reducing disaster risk is a shared responsibility. The resilience gap is too large, too multifaceted and too complex to be closed by one stakeholder group alone.

Coupled with an acknowledgement of the need to shift focus from managing disasters to managing disaster risk, a multidisciplinary approach, leveraging private and public sector expertise, has rightly become central to the narrative.

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The Age of Innocence

Professor Ilan Noy holds a unique ”Chair in the Economics of Disasters” at the Victoria University of Wellington, New Zealand. He has proposed in a couple of research papers that instead of counting disaster deaths and economic costs, we should report the “expected life-years” lost, not only for human casualties but also for the life-years of work that will be required to repair all the damage to buildings and infrastructure.

The idea is based on the World Health Organization’s Disability Adjusted Life Years (DALYs) lost through disease and injury (WHO 2013). The motivation is to escape from the distortion introduced by measuring the impact of global disasters in dollars, as loss from the richest countries will always dominate this metric. Noy’s proposal converts injuries into life-years lost, based on how long it takes for the injured to return to complete health, while also factoring the degree of permanent disability multiplied by its duration. This is topped up by a “welfare reduction weight” for all those exposed to a disaster. The final component of the index attempts to capture how many years of human endeavor is lost to recovering the buildings and assets destroyed in the disaster.

There is plenty to argue over in terms of how deaths, injury and damage should be combined. In particular, the assumption that additional work to rebuild a city, is the same as a shortened life, seems somewhat reductive.

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