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Helen Yates
September 06, 2019
Like Moths to the Flame

Why is it that, in many different situations and perils, people appear to want to relocate toward the risk? What is the role of the private insurance and reinsurance industry in curbing their clients’ risk tropism?  Florida showed rapid percentage growth in terms of exposure and number of policyholders If the Great Miami Hurricane of 1926 were to occur again today it would result in insurance losses approaching US$200 billion. Even adjusted for inflation, that is hundreds of times more than the US$100 million damage toll in 1926. Over the past 100 years, the Florida coast has developed exponentially, with wealthy individuals drawn to buying lavish coastal properties — and the accompanying wind and storm-surge risks. Since 2000, the number of people living in coastal areas of Florida increased by 4.2 million, or 27 percent, to 19.8 million in 2015, according to the U.S. Census Bureau. This is an example of unintended “risk tropism,” explains  Robert Muir-Wood, chief research officer at RMS. Just as the sunflower is a ‘heliotrope’, turning toward the sun, research has shown how humans have an innate drive to live near water, on a river or at the beach, often at increased risk of flood hazards.   “There is a very strong human desire to find the perfect primal location for your house. It is something that is built deeply into the human psyche,” Muir-Wood explains. “People want to live with the sound of the sea, or in the forest ‘close to nature,’ and they are drawn to these locations thinking about all the positives and amenity values, but not really understanding or evaluating the accompanying risk factors. “People will pay a lot to live right next to the ocean,” he adds. “It’s an incredibly powerful force and they will invest in doing that, so the price of land goes up by a factor of two or three times when you get close to the beach.”  Even when beachfront properties are wiped out in hurricane catastrophes, far from driving individuals away from a high-risk zone, research shows they simply “build back bigger,” says Muir-Wood. “The disaster can provide the opportunity to start again, and wealthier people move in and take the opportunity to rebuild grander houses. At least the new houses are more likely to be built to code, so maybe the reduction in vulnerability partly offsets the increased exposure at risk.” Risk tropism can also be found with the encroachment of high-value properties into the wildlands of California, leading to a big increase in wildfire insurance losses. Living close to trees can be good for mental health until those same trees bring a conflagration. Insurance losses due to wildfire exceeded US$10 billion in 2017 and have already breached US$12 billion for last year’s Camp, Hill and Woolsey Fires, according to the California Department of Insurance. It is not the number of fires that have increased, but the number of houses consumed by the fires.  “Insurance tends to stop working when you have levels of risk above one percent […] People are unprepared to pay for it” Robert Muir-Wood RMS Muir-Wood notes that the footprint of the 2017 Tubbs Fire, with claims reaching to nearly US$10 billion, was very similar to the area burned during the Hanley Fire of 1964. The principal difference in outcome is driven by how much housing has been developed in the path of the fire. “If a fire like that arrives twice in one hundred years to destroy your house, then the amount you are going to have to pay in insurance premium is going to be more than 2 percent of the value per year,” he says.  “People will think that’s unjustified and will resist it, but actually insurance tends to stop working when you have levels of risk cost above 1 percent of the property value, meaning, quite simply, that people are unprepared to pay for it.”   Risk tropism can also be found in the business sector, in the way that technology companies have clustered in Silicon Valley: a tectonic rift within a fast-moving tectonic plate boundary. The tectonics have created the San Francisco Bay and modulate the climate to bring natural air-conditioning. “Why is it that, around the world, the technology sector has picked locations  — including Silicon Valley, Seattle, Japan and Taiwan — that are on plate boundaries and are earthquake prone?” asks Muir-Wood. “There seems to be some ideal mix of mountains and water. The Bay Area is a very attractive environment, which has brought the best students to the universities and has helped companies attract some of the smartest people to come and live and work in Silicon Valley,” he continues. “But one day there will be a magnitude 7+ earthquake in the Bay Area that will bring incredible disruption, that will affect the technology firms themselves.” Insurance and reinsurance companies have an important role to play in informing and dissuading organizations and high net worth individuals from being drawn toward highly exposed locations; they can help by pricing the risk correctly and maintaining underwriting discipline. The difficulty comes when politics and insurance collide.  The growth of Fair Access to Insurance Requirements (FAIR) plans and beach plans, offering more affordable insurance in parts of the U.S. that are highly exposed to wind and quake perils, is one example of how this function is undermined. At its peak, the size of the residual market in hurricane-exposed states was US$885 billion, according to the Insurance Information Institute (III). It has steadily been reduced, partly as a result of the influx of non-traditional capacity from the ILS market and competitive pricing in the general reinsurance market.  However, in many cases the markets-of-last-resort remain some of the largest property insurers in coastal states. Between 2005 and 2009 (following Hurricanes Charley, Frances, Ivan and Jeanne in 2004), the plans in Mississippi, Texas and Florida showed rapid percentage growth in terms of exposure and number of policyholders. A factor fueling this growth, according to the III, was the rise in coastal properties.  As long as state-backed insurers are willing to subsidize the cost of cover for those choosing to locate in the riskiest locations, private (re)insurance will fail as an effective check on risk tropism, thinks Muir-Wood. “In California there are quite a few properties that have not been able to get standard fire insurance,” he observes. “But there are state or government-backed schemes available, and they are being used by people whose wildfire risk is considered to be too high.”

NIGEL ALLEN
September 06, 2019
A Climate Model Challenge

Insurance-linked securities (ILS) investors want to know more about how climate change impacts investment decisions, according to Paul Wilson, head of non-life analytics at Securis Investment Partners, an ILS asset manager We make investments that are typically annual to two-to-three years in duration, so we need to understand the implications of climate change on those timescales,” explains Paul Wilson, head of non-life analytics at Securis Investment Partners. “We reevaluate investments as part of any renewal process, and it’s right to ask if any opportunity is still attractive given what we know about how our climate is changing. “The fundamental question that we’re trying to address is, ‘Have I priced the risk of this investment correctly for the next year?’” he continues. “And therefore, we need to know if the catastrophe models we are using accurately account for the impact climate change may be having. Or are they overly reliant on historical data and, as such, are not actually representing the true current risk levels for today’s climate?” Expertise in climate change is a requirement for how Securis is thinking about risk. “We have investors who are asking questions about climate change, and we have a responsibility to be able to demonstrate to them that we are taking the implications into consideration in our investment decisions.” “We have investors who are asking questions about climate change, and we have a responsibility to demonstrate to them that we are taking the implications into consideration in our investment decisions Paul Wilson Securis Investment Partners The rate at which a changing climate may influence natural catastrophes will present both a challenge and opportunity to the wider industry as well as to catastrophe modeling companies, thinks Wilson. The results coming out of climate change attribution studies are going to have to start informing the decisions around risk. For example, according to attribution studies, climate change tripled the chances of Hurricane Harvey’s record rainfall.  “Climate change is a big challenge for the catastrophe modeling community,” he says. “It’s going to put a greater burden on catastrophe modelers to ensure that their models are up to date. The frequency and nature of model updates will have to change. Models we are using today may become out of date in just a few years’ time. That’s interesting when you think about the number of perils and regions where climate change could have a significant impact. “All of those climate-related models could be impacted by climate change, so we have to question the impact that is having today,” he adds. “If the model you are using to price the risk has been calibrated to the last 50 years, but you believe the last 10 or last 20 years are more representative because of the implication of climate change, then how do you adjust your model according to that? That’s the question we should all be looking to address.”

NIGEL ALLEN
September 06, 2019
ILS: A Responsible Investment Approach

As environmental, social and governance principles become more prominent in guiding investment strategies, the ILS market must respond  In recent years, there has been a sharper focus by the investment community on responsible investment. One indicator of this has been the increased adoption of the Principles for Responsible Investment (PRI), as environmental, social and governance (ESG) concerns become a more prominent influencer of investment strategies. Investment houses are also seeking closer alignment between their ESG practices and the United Nations’ Sustainable Development Goals (SDGs). The 17 interconnected SDGs, set in 2015, are a call to action to end poverty, achieve peace and prosperity for all, and create a sustainable society by 2030. As investors target more demonstrable outcomes from their investment practices, is there a possible opportunity for the insurance-linked securities (ILS) market to grow, given the potential societal capital that insurance can generate? “Insurance certainly has all of the hallmarks of an ESG-compatible investment opportunity,” believes Charlotte Acton, director of capital and resilience solutions at RMS. “It has the potential to promote resilience through enabling broader access and uptake of appropriate affordable financial protection and reducing the protection gap; supporting faster and more efficient responses to disasters; and incentivizing mitigation and resilient building practices pre- and post-event.” RMS has been collaborating on numerous initiatives designed to further the role of insurance and insurance technologies in disaster and climate-change resilience. These include exploring ways to monetize the dividends of resilience to incentivize resilient building, using catastrophe models to quantify the benefits of resilience investments such as flood defenses, and earthquake retrofit programs for housing. The work has also involved designing innovative parametric structures to provide rapid post-disaster liquidity. “Investors will want a clear understanding of the exposure or assets that are being protected and whether they are ESG-friendly” Charlotte Acton RMS “ILS offers a clear route for investors to engage with insurance,” explains Acton, “broadening the capital pool that supports insurance is critical as it facilitates the expansion of insurance to new regions and allows the industry to absorb increasingly large losses from growing threats such as climate change.” Viewed as a force for social good, it can certainly be argued that insurance-linked securities supports a number of the U.N.’s SDGs, including reducing the human impact of disasters and creating more sustainable cities, increasing overall resilience levels and increasing access to financial services that enhance sustainable growth potential. While there is opportunity for ILS to play a large part in ESG, the specific role of ILS within PRI is still being determined. According to LGT Capital Partners ESG Report 2019, managers in the ILS space have, in general, yet to start “actively integrating ESG into their investment strategies,” adding that across the ILS asset class “there is still little agreement on how ESG considerations should be applied. However, there is movement in this area. For example, the Bermuda Stock Exchange, a primary exchange for ILS issuers, recently launched an ESG initiative in line with the World Federation of Exchanges’ Sustainability Principles, stating that ESG was a priority in 2019 “with the aim to empower sustainable and responsible growth for its member companies, listings and the wider community.” For ILS to become a key investment option for ESG-focused investors, it must be able to demonstrate its sustainability credentials clearly. “Investors will want a clear understanding of the exposure or assets that are being protected,” Acton explains, “and whether they are ESG-friendly. They will want to know whether the protection offered provides significant societal benefits. If the ILS market can factor ESG considerations into its approach more effectively, then there is no reason why it should not attract greater attention from responsible investors.”

Helen Yates
September 06, 2019
Today's Stress Test for Tomorrow's Climate

Why the PRA’s stress test has pushed climate change to the top of (re)insurance company agendas As part of its 2019 biennial insurance stress test, the U.K. insurance industry regulator  — for the first time  — asked insurers and reinsurers to conduct an exploratory exercise in relation to climate change. Using predictions published by the United Nations’ Intergovernmental Panel on Climate Change (IPCC) and in other academic literature, the Bank of England’s Prudential Regulation Authority (PRA) came up with a series of future climate change scenarios, which it asked (re)insurers to use as a basis for stress-testing the impact on their assets and liabilities. The PRA stress test came at a time when pressure is building for commercial and financial services businesses around the world to assess the likely impact of climate change on their business, through initiatives such as the Task Force for Climate-Related Financial Disclosures (TCFD). The submission deadline for the stress-tested scenarios ended on October 31, 2019, following which the PRA will publish a summary of overall results. From a property catastrophe (re)insurance industry perspective, the importance of assessing the potential impact, both in the near and long term, is clear. Companies must ensure their underwriting strategies and solvency levels are adequate so as to be able to account for additional losses from rising sea levels, more climate extremes, and potentially more frequent and/or intense natural catastrophes. Then there’s the more strategic considerations in the long term — how much coverages change and what will consumers demand in a changing climate? The PRA stress test, explains Callum Higgins, product manager of global climate at RMS, is the regulator’s attempt to test the waters. The hypothetical narratives are designed to help companies think about how different plausible futures could impact their business models, according to the PRA. “The climate change scenarios are not designed to assess current financial resilience but rather to provide additional impetus in this area, with results comparable across firms to better understand the different approaches companies are using.” “There was pressure on clients to respond to this because those that don’t participate will probably come under greater scrutiny” Callum Higgins RMS RMS was particularly well placed to support (re)insurers in responding to the “Assumptions to Assess the Impact on an Insurer’s Liabilities” section of the climate change scenarios, with catastrophe models the perfect tools to evaluate such physical climate change risk to liabilities. This portion of the stress test examined how changes in both U.S. hurricane and U.K. weather risk under the different climate change scenarios may affect losses. The assumptions around U.K. weather included shifts in U.K. inland and coastal flood hazard, looking at the potential loss changes from increased surface runoff and sea level rise. While in the U.S., the assumptions included a 10 percent and 20 percent increase in the frequency of major hurricanes by 2050 and 2100, respectively.  “While the assumptions and scenarios are hypothetical, it is important (re)insurers use this work to develop their capabilities to understand physical climate change risk,” says Higgins. “At the moment, it is exploratory work, but results will be used to guide future exercises that may put (re)insurers under pressure to provide more sophisticated responses.” Given the short timescales involved, RMS promptly modified the necessary models in time for clients to benefit for their submissions. “To help clients start thinking about how to respond to the PRA request, we  provided them with industrywide factors, which allowed for the approximation of losses under the PRA assumptions but will likely not accurately reflect the impact on their portfolios. For this reason, we could also run (re)insurers’ own exposures through the adjusted models, via RMS Analytical Services, better satisfying the PRA’s requirements for those who choose this approach. “To reasonably represent these assumptions and scenarios, we think it does need help from vendor companies like RMS to adjust the model data appropriately, which is possibly out of scope for many businesses,” he adds. Detailed results based on the outcome of the stress-test exercise can be applied to use cases beyond the regulatory submission for the PRA. These or other similar scenarios can be used to sensitivity test possible answers to questions such as how will technical pricing of U.K. flood be affected by climate change, how should U.S. underwriting strategy shift in response to sea level rise or how will capital adequacy requirements change as a result of climate change — and inform strategic decisions accordingly.

NIGEL ALLEN
September 06, 2019
The Value of Defense

Current flood defenses in the U.K. reduce annual losses from river flooding by £1.1 billion, according to research by RMS Flooding is one of the most significant natural hazards for the U.K. with over five million homes and businesses in England at risk of flooding and coastal erosion, according to the Environment Agency.  Flood barrier in Shropshire, England In 2015, the U.K. government announced a six-year, £2.3 billion investment in flood defenses. But the Environment Agency proposes a further annual investment of £1 billion through 2065 to keep pace with the flood-related impacts of climate change and shifts in exposure levels. Critical to targeted flood mitigation investment is understanding the positive impacts of current defenses. In June 2019, Flood Re* released its Investing in Flood Risk Management and Defenses study, conducted by RMS.  Addressing the financial benefits of existing flood defenses for the first time, data from the RMS® Europe Inland Flood HD Model demonstrated that current infrastructure reduced annual losses from riverine flooding by £1.1 billion. This was based on ground-up losses, using the RMS U.K. Economic Exposure Database covering buildings and contents for residential, commercial, industrial and agricultural, plus business interruption losses.  Critical to targeted flood investment is understanding the positive impacts of current defenses “Our flood model incorporates countrywide defense data sourced from the Environment Agency and the Scottish Flood Defence Asset Database,” says Theresa Lederer, a consultant within the RMS capital and resilience solutions team, “including walls, levees and embankments, carefully reviewed and augmented by RMS experts. Our initial model run was with defenses in place, and then, using the in-built model functionality to enter user-defined defense values, we removed these [defenses in place].”  The differences in average annual loss results between the two analyses was £1.1 billion, with losses increasing from £0.7 billion under current defenses to £1.8 billion in the undefended case. The analysis also revealed a differentiated picture of flood risk and defenses at the regional and local levels. “The savings relative to total inland flood risk are more pronounced in Northern Ireland and England (both over a 50 percent reduction in average annual losses) than Scotland and Wales,” she explains. “But when you view the savings relative to surface-water flood risk only, these are similarly significant across the country, with loss reductions exceeding 75 percent in all regions. This reflects the fact that pluvial flooding, which is kept constant in the analysis, is a bigger loss driver in Scotland and Wales, compared to the rest of the U.K.” Other insights included that the more deprived half of the population — based on the U.K. Townsend Deprivation Index — benefited from 70 percent of the loss reduction. The study also showed that while absolute savings were highest for catastrophic events, the proportion of the savings compared to the overall level of loss caused by such events was less significant. “In the case of 1-in-5-year events,” Lederer says, “river flood defenses prevent approximately 70 percent of inland flood losses.  For 1-in-500-year events this drops to 30 percent; however, the absolute value of those 30 percent is far higher than the absolute savings realized in a 1-in-5-year event. “Should the focus of defenses therefore be on providing protection from major flood events, with potential catastrophic impacts even though return on investment might not be as attractive given their infrequency? Or on attritional losses from more frequent events, which might realize savings more frequently but fail to protect from the most severe events? Finding a balanced, data-driven approach to flood defense investment is crucial to ensure the affordability of sustainable flood resilience.”

NIGEL ALLEN
September 06, 2019
The Power of a Crisis

As Christchurch City Council continues to build back better, will its resilience investment pay dividends when it comes to citywide insurance cover? The Canterbury Earthquake Sequence is the largest insured event in New Zealand’s history. Between September 2010 and December 2011, four major earthquakes caused damage to approximately 168,000 residential buildings. The earthquakes spawned more than 770,000 claims for the country’s Earthquake Commission (EQC) alone, resulting in a payout of around NZ$10 billion (US$6.4 billion). The private sector absorbed almost twice that, with the Insurance Council of New Zealand putting the figure at NZ$21.4 billion (as of March 31, 2019). Christchurch Art Gallery. The city’s art gallery, for example, has been retrofitted to resist even the most severe earthquake activity. Nine years on from the initial tremors, there remain over 1,200 open property claims in the private market, while the outstanding figure for the EQC stood at some 2,600 claims in February 2018. “Dealing with the property claims was extremely challenging,” explains Raf Manji, chair of the Christchurch City Council’s Finance Committee, “not just in terms of contractual issues, but because the insurance was based on building-by-building cover. And when you’re dealing with damage to so many buildings, it is going to take a very long time to agree what that damage is.” Building Back Better The need to rebuild Christchurch presented the city with an opportunity.  “As American politician Rahm Emanuel once said, ‘Never let a crisis go to waste,’” says Lianne Dalziel, mayor of Christchurch. “The earthquakes provided a major opportunity to build back better and ensure we embed resilience into every aspect, from below ground up.” That commitment means that new construction, whether of above-ground assets or horizontal infrastructure, is being carried out to a level much higher than building codes dictate.  “With the information, we want more informed conversations with both traditional and alternative markets about how we transfer risk more effectively” Raf Manji Christchurch City Council “We’re building to an exceptionally high standard,” states Mike Gillooly, chief resilience officer for the city. This is a relatively new public position created following Christchurch’s inclusion in the first wave of the Rockefeller Foundation’s 100 Resilient Cities program. “The city’s art gallery, for example, has been retrofitted to resist even the most severe earthquake activity,” Gillooly continues. But this dedication to resilience goes beyond the immediate rebuild. The council is also making resilience a core component of its long-term strategic planning. The city’s 2021-2051 infrastructure strategy, which covers the council’s investments in water supply, wastewater, stormwater, transport, parks, facilities, solid waste and communication technology for the next 30 years, will have resilience as its overarching theme. “This is the first time we are proactively building risk and resilience into our long-term planning framework,” states Dalziel. “We are developing a much deeper appreciation of risk and have spent considerable time understanding our infrastructure. We are also working toward a much more sophisticated engagement with risk at the community level.” “It’s not only about strengthening our physical infrastructure,” she continues. “It’s also about strengthening our social infrastructure.”  “We are committed to promoting greater community well-being. We need to build up social capital by bringing people together to plan for an uncertain future. High levels of social capital accelerate recovery in the aftermath of a shock, while also creating greater inherent resilience to more slow-moving challenges, such as climate change and associated rising sea levels.” Dalziel is quick to stress the importance of insurance in all this. “There is a strong relationship between economic resilience and social resilience, and the role of insurance in facilitating both cannot be underestimated. The value of insurance does not simply equal the sum of claims paid — it’s as much about the financial and social well-being that it supports.”  Making Resilience Pay Recently insurers across New Zealand have been shifting their appetite and premiums in high-hazard regions to be more reflective of the country’s risk profile.  There has been a shift too in the council’s approach to insurance — a shift that is central to its resilience efforts, explains Manji. “Following the earthquakes, Lianne asked me to run for council. I was a former financial markets trader and she wanted someone onboard with a financial background. But when I joined, I was taken aback by the lack of risk understanding that I saw at the local government level.” One of his first steps was to set up an independently chaired audit and risk committee and introduce a new risk management framework — a model that has since been adopted by Auckland. “Through this new framework, we were able to establish a much more sophisticated view of risk,” he explains, “and we also launched a five-year program to document every single asset in place — both above and below ground. Having this granular level of exposure insight means we can assess our approach to mitigating, retaining and transferring risk from a much more data-informed position.” At present, Christchurch is conservatively insured. This is a very deliberate choice, however, and Manji is convinced of the benefits of this approach. “This excess capacity means we have headroom into which we can grow as we continue to construct new and reconstruct old assets. That’s a much stronger position to be in than having to return to the market seeking more limit when capacity may be limited. It also demonstrates a long-term commitment to the insurance market upon which you can have much more constructive, ongoing dialogue.” Data-Informed Dialogue Christchurch City Council has been making use of insurance capital for many years. It was the 2010-11 earthquakes, though, that spurred its focus on arming itself with increasingly higher-resolution data. “We’re now coming to the table each year with an ever more accurate picture of our exposure. Working with RMS, we’ve been able to significantly evolve our risk thinking based on a range of citywide loss scenarios, and to look at ways of creating a more effective balance between traditional and more innovative parametric-based solutions.” That desire for balance does not just apply to the source of Christchurch capital, but also what kinds of assets that capital covers. At present, while the council has secured coverage for 65 percent of the value of its above-ground structures, it has only managed to buy insurance to cover approximately 15 percent of its underground infrastructure. “The insurance market is not comfortable with providing cover for underground infrastructure because it tends not to be well understood or documented,” Manji continues.  “Unlike most cities, however, we know exactly what is underground and just how resilient it is. With that information, we want to have more informed conversations — with both the traditional market and alternative providers of risk capital — about how we transfer this risk more effectively. Parametric-based solutions, for example, give us the opportunity to look beyond typical building replacement covers and take a bigger-picture view of what we want to achieve from our investment in risk transfer. “And whereas an indemnity-based policy is designed primarily to return you to where you were prior to the loss, parametric payouts can be deployed for what ever purpose you want. That flexibility — along with the speed and certainty of payout — is incredibly valuable.” For Gillooly, it is about becoming an increasingly sophisticated user of risk capital and engaging in ever more mature dialogue with the markets. “If we can demonstrate through the data and analytics that we understand the exposure, that we’ve quantified the risk and we’re investing in effective risk reduction, then the market needs to acknowledge these efforts in the form of increased capacity, reduced premiums or both. Data, analytics and risk insights will continue to be the key focus of our annual discussions with the London market — and will allow us to explore parametric insurance-linked securities with confidence too.”

NIGEL ALLEN
May 20, 2019
Vulnerability: In Equal Measure

As international efforts grow to minimize the disproportionate impact of disasters on specific parts of society, EXPOSURE looks at how close public/private collaboration will be critical to moving forward There is a widely held and understandable belief that large-scale disasters are indiscriminate events. They weigh out devastation in equal measure, irrespective of the gender, age, social standing or physical ability of those impacted. The reality, however, is very different. Catastrophic events expose the various inequalities within society in horrific fashion. Women, children, the elderly, people with disabilities and those living in economically deprived areas are at much greater risk than other parts of society both during the initial disaster phase and the recovery process. Cyclone Gorky, for example, which struck Bangladesh in 1991, caused in the region of 140,000 deaths — women made up 93 percent of that colossal death toll. Similarly, in the 2004 Indian Ocean Tsunami some 70 percent of the 250,000 fatalities were women. Looking at the disparity from an age-banded perspective, during the 2005 Kashmir Earthquake 10,000 schools collapsed resulting in the deaths of 19,000 children. Children also remain particularly vulnerable well after disasters have subsided. In 2014, a study by the University of San Francisco of death rates in the Philippines found that delayed deaths among female infants outnumbered reported typhoon deaths by 15-to-1 following an average typhoon season — a statistic widely attributed to parents prioritizing their male infants at a time of extreme financial difficulty. And this disaster disparity is not limited to developing nations as some may assume. Societal groups in developed nations can be just as exposed to a disproportionate level of risk. During the recent Camp Fire in California, figures revealed that residents in the town of Paradise aged 75 or over were 8 times more likely to die than the average for all other age bands. This age-related disparity was only marginally smaller for Hurricane Katrina in 2005. The Scale of the Problem These alarming statistics are now resonating at the highest levels. Growing recognition of the inequalities in disaster-related fatality ratios is now influencing global thinking on disaster response and management strategies. Most importantly, it is a central tenet of the Sendai Framework for Disaster Risk Reduction 2015–2030, which demands an “all-of-society engagement and partnership” to reduce risk that encompasses those “disproportionately affected by disasters.” Yet a fundamental problem is that disaggregated data for specific vulnerable groups is not being captured for the majority of disasters. “There is a growing acknowledgment across many nations that certain groupings within society are disproportionately impacted by disasters,” explains Alison Dobbin, principal catastrophe risk modeler at RMS. “Yet the data required to get a true sense of the scale of the problem simply isn’t being utilized and disaggregated in an effective manner post-disaster. And without exploiting and building on the data that is available, we cannot gain a working understanding of how best to tackle the multiple issues that contribute to it.” The criticality of capturing disaster datasets specific to particular groups and age bands is clearly flagged in the Sendai Framework. Under the “Guiding Principles,” the document states: “Disaster risk reduction requires a multi-hazard approach and inclusive risk-informed decision-making based on the open exchange and dissemination of disaggregated data, including by sex, age and disability, as well as on easily accessible, up-to-date, comprehensible, science-based, non-sensitive risk information, complemented by traditional knowledge.” Gathering the Data Effective data capture, however, requires a consistent approach to the collection of disaggregated information across all groups — first, to understand the specific impacts of particular perils on distinct groups, and second, to generate guidance, policies and standards for preparedness and resilience that reflect the unique sensitivities. While efforts to collect and analyze aggregated data are increasing, the complexities involved in ascertaining differentiated vulnerabilities to specific groups are becoming increasingly apparent, as Nicola Howe, lead catastrophe risk modeler at RMS, explains. “We can go beyond statistics collection, and model those factors which lead to discriminative outcomes” Nicola Howe RMS “You have to remember that social vulnerability varies from place to place and is often in a state of flux,” she says. “People move, levels of equality change, lifestyles evolve and the economic conditions in specific regions fluctuate. Take gender-based vulnerabilities for example. They tend not to be as evident in societies that demonstrate stronger levels of sexual equality. “Experiences during disasters are also highly localized and specific to the particular event or peril,” she continues. “There are multiple variables that can influence the impact on specific groups. Cultural, political and economic factors are strong influencers, but other aspects such as the time of day or the particular season can also have a significant effect on outcomes.” This creates challenges, not only for attributing specific vulnerabilities to particular groups and establishing policies designed to reduce those vulnerabilities, but also for assessing the extent to which the measures are having the desired outcomes. Establishing data consistency and overcoming the complexities posed by this universal problem will require the close collaboration of all key participants. “It is imperative that governments and NGOs recognize the important part that the private sector can play in working together and converting relevant data into the targeted insight required to support effective decision-making in this area,” says Dobbin. A Collective Response At time of writing, Dobbin and Howe were preparing to join a diverse panel of speakers at the UN’s 2019 Global Platform for Disaster Risk Reduction in Switzerland. This year’s convening marks the third consecutive conference at which RMS has participated. Previous events have seen Robert Muir-Wood, chief research officer, and Daniel Stander, global managing director, present on the resilience dividend andrisk finance. The title of this year’s discussion is “Using Gender, Age and Disability-Responsive Data to Empower Those Left Furthest Behind.” “One of our primary aims at the event,” says Howe, “will be to demonstrate the central role that the private sector, and in our case the risk modeling community, can play in helping to bridge the data gap that exists and help promote the meaningful way in which we can contribute.” The data does, in some cases, exist and is maintained primarily by governments and NGOs in the form of census data, death certificates, survey results and general studies. “Companies such as RMS provide the capabilities to convert this raw data into actionable insight,” Dobbin says. “We model from hazard, through vulnerability and exposure, all the way to the financial loss. That means we can take the data and turn it into outputs that governments and NGOs can use to better integrate disadvantaged groups into resilience planning.” But it’s not simply about getting access to the data. It is also about working closely with these bodies to establish the questions that they need answers to. “We need to understand the specific outputs required. To this end, we are regularly having conversations with many diverse stakeholders,” adds Dobbin. While to date the analytical capabilities of the risk modeling community have not been directed at the social vulnerability issue in any significant way, RMS has worked with organizations to model human exposure levels for perils. Collaborating with the Workers’ Compensation Insurance Rating Bureau of California (WCIRB), a private, nonprofit association, RMS conducted probabilistic earthquake analysis on exposure data for more than 11 million employees. This included information about the occupation of each employee to establish potential exposure levels for workers’ compensation cover in the state. “We were able to combine human exposure data to model the impact of an earthquake, ascertaining vulnerability based on where employees were likely to be, their locations, their specific jobs, the buildings they worked in and the time of day that the event occurred,” says Howe. “We have already established that we can incorporate age and gender data into the model, so we know that our technology is capable of supporting detailed analyses of this nature on a huge scale.” She continues: “We must show where the modeling community can make a tangible difference. We bring the ability to go beyond the collection of statistics post-disaster and to model those factors that lead to such strong differences in outcomes, so that we can identify where discrimination and selective outcomes are anticipated before they actually happen in disasters. This could be through identifying where people are situated in buildings at different times of day, by gender, age, disability, etc. It could be by modeling how different people by age, gender or disability will respond to a warning of a tsunami or a storm surge. It could be by modeling evacuation protocols to demonstrate how inclusive they are.” Strengthening the Synergies A critical aspect of reducing the vulnerability of specific groups is to ensure disadvantaged elements of society become more prominent components of mitigation and response planning efforts. A more people-centered approach to disaster management was a key aspect of the forerunner to the Sendai Framework, the Hyogo Framework for Action 2005–2015. The plan called for risk reduction practices to be more inclusive and engage a broader scope of stakeholders, including those viewed as being at higher risk. This approach is a core part of the “Guiding Principles” that underpin the Sendai Framework. It states: “Disaster risk reduction requires an all-of-society engagement and partnership. It also requires empowerment and inclusive, accessible and non-discriminatory participation, paying special attention to people disproportionately affected by disasters, especially the poorest. A gender, age, disability and cultural perspective should be integrated in all policies and practices, and women and youth leadership should be promoted.” The Framework also calls for the empowerment of women and people with disabilities, stating that enabling them “to publicly lead and promote gender equitable and universally accessible response, recovery, rehabilitation and reconstruction approaches.” This is a main area of focus for the U.N. event, explains Howe. “The conference will explore how we can promote greater involvement among members of these disadvantaged groups in resilience-related discussions, because at present we are simply not capitalizing on the insight that they can provide. “Take gender for instance. We need to get the views of those disproportionately impacted by disaster involved at every stage of the discussion process so that we can ensure that we are generating gender-sensitive risk reduction strategies, that we are factoring universal design components into how we build our shelters, so women feel welcome and supported. Only then can we say we are truly recognizing the principles of the Sendai Framework.”

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