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SPECIAL FEATURE – NAT CATS
threatened by storm surge. The Pearl River Delta alone which Japan, which also experienced the triple disaster in 2011 from
includes cities such as Guangzhou, Shenzhen and Tianjin the Tsunami, currently spends about 5% of its annual budget
has higher loss potential than all of Thailand, which in on disaster and risk management.
2011 experienced the largest flood loss in history – costing
approximately $50 billion in economic damages and over $16 The Asian Development Bank has also invested more than
billion in insured losses. $10 billion over the last 15 years to implement important early
storm warning systems in Bangladesh and extensive flood
Ulsan in South Korea is another industrial exposure hotspot control projects in Pakistan and Indonesia that have saved
in Asia that is highly vulnerable to typhoons. Another example thousands of lives.
in Asia would be Manila, where 2009 floodwaters from tropical Storm surge protection
storm Ketsana rose up to 21 feet and inundated more than 80% Adequate preparedness before a storm arrives is key in order
of the city. to mitigate potential losses, particularly in areas such as
Is Asia prepared? construction sites which are extremely susceptible. There are
The likelihood of Asia suffering from a Katrina-style event in four crucial areas of windstorm loss mitigation:
terms of significant losses is not implausible. The accumulation
of risks in some Asian industrial parks is rising exponentially • Pre-windstorm planning including development of a
with greater interconnectedness of the global economy, comprehensive emergency plan and testing it. Inspect roofs and
resulting in business interruption (BI), contingent business the building envelope; anchor large equipment and prepare for
interruption (CBI) and supply chain exposures. And if Nat CAT possible flooding.
risk management procedures are not in place or have not been
regularly reviewed, the magnitude of such losses can increase • During a windstorm, response personnel should monitor
significantly. One concern is that businesses put a lot of time for leaks, fire and damage.
into assessing direct damage and looking at their own BI impact
but probably not as much as they should do in terms of the risks • After a windstorm, the site should be secured to prevent
associated with supplies and customers (third party risks). unauthorised entry. An immediate damage assessment should
be conducted if safe to do so.
The events in recent years have resulted in several Asian
megacities stepping up their disaster and risk management • Business continuity management is crucial as just-in-
mitigation efforts. China spends an estimated $50 billion time production, lean inventories and global supply chains
annually to manage risks in the areas of flood management, can easily multiply negative effects. Property damage and
better defences, early warning systems, evacuation planning business interruption are usually covered by insurance policies
and more resilient infrastructure. but often there is loss of market share, suppliers, clients and
staff. Businesses need a two-fold approach: prevention and
For example, Shanghai has installed flood gates and levees cure. So they should prepare with preventative measures to
to protect the city from major floods. Following the major 2011 minimise risk up front: for example, risk management, business
floods, Bangkok has also improved waterways and pumping continuity planning, and key supplier analyses. And for the
capacity that reduce the extent of flooded areas by some 50%. cure, they need insurance coverage combined with a robust
business recovery plan.
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