Commitment issues rise amidst climate risks dampen insurance reliability

Typhoon Koinu alone in 2023 led to over $500m in insurance claims.

Despite insurance being top-of-mind when it comes to Asia’s volatile environment, FM Global points out that one of the challenges in obtaining insurance is the commitment to mitigate climate risks.

The annual monsoon season from May to October regularly causes devastating floods in countries like Thailand and Malaysia, while typhoons frequently hit the Philippines, South Korea, and Hong Kong from July to September. 

The Philippines faces an average of 20 typhoons per year, including powerful ones like 2022's Typhoon Rai, which caused $215m in agricultural losses. 

Typhoon Koinu in 2023 led to over $500m in insurance claims and significant disruptions in Hong Kong. Malaysia also faced substantial damages to public assets and agriculture due to flooding in 2023.

The growing frequency and severity of these events have led to a greater urgency in addressing infrastructure and supply chain losses. 

Companies are under increasing regulatory and stakeholder pressure to evaluate and measure the financial impact of these risks. Investors also demand long-term risk mitigation strategies to enhance resilience.

In disaster-prone Asia, measures might include relocating production lines to safer areas, installing wind-resistant roofing, or applying new site selection criteria. These often require financial investment but are critical for reducing the severity of future risk impacts.

For business decision-makers, climate risk presents a clear choice between resilience and disruption. Opting for resilience can significantly reduce exposure to business disruption. 

As the region grapples with the combined social and economic impacts of high-impact weather events, enhancing climate resilience is critical for future stability.