Haiti and Mozambique most vulnerable to economic losses from natural disasters

Report
from Maplecroft
Published on 08 Jul 2010
Italy, Japan, China, USA, Spain and France rated "high risk"

New research identifying Haiti and Mozambique as the countries most vulnerable to economic losses from natural disasters also classifies a number of industrialised economies, including Italy, Japan, China, USA, Spain and France, as "high risk" environments for investors, insurers and business.

The Natural Disasters Economic Loss Index (NDELI), released by risk intelligence and ratings company, Maplecroft, evaluates the economic impact of earthquakes, volcanic eruptions, tsunamis, storms, flooding, drought, landslides, extreme temperatures and epidemics between 1980 and 2010.

The index measures the risk of economic losses from damage costs and deaths caused by natural disasters to reflect both the direct economic impact of natural disasters on property and infrastructure, plus the indirect economic impacts on populations. To provide an accurate picture of the global situation the NDELI has been split into two rankings; one measuring the risks to the 87 countries that suffer a high frequency of natural disasters; the other evaluating the 116 countries that experience less than one event per year.

Seven countries are rated at "extreme risk" in the high frequency index, with Haiti (1), Mozambique (2), Honduras (3), Vanuatu (4), Zimbabwe (5), El Salvador (6) and Nicaragua (7) topping the ranking. However, the industrialised economies of Italy (18), Japan (23), China (25), USA (29), Spain (37) and France (48) are all in the "high risk" category, whilst India (51), UK (53), Germany (54) and Canada (55) are rated "medium risk."

"When economic losses are taken as absolute figures, it is predominantly the industrialised countries, such as USA and China, that shoulder the greatest costs," explained Maplecroft Environmental Analyst, Dr Anna Moss. "However, when losses are calculated as a percentage of GDP, it is developing countries that are most exposed. For example, the USA's losses from the 1997-1998 El Niño were US$ 1.96 billion, or 0.03 percent of GDP, whereas in Ecuador, economic losses were US$ 2.9 billion, or 14.6 percent of GDP."

Haiti, which was hit by a 7.0 magnitude earthquake in January 2010, suffered an estimated 222,570 fatalities and close to $8 billion worth of economic damage, according to its government. However, Haiti is also highly vulnerable to hydro-meteorological disasters and Maplecroft's research reveals that even without the damage from the 2010 earthquake, which was equivalent to 73% of annual GDP, the Caribbean country would still have had the 12th highest economic loss in the index.

Mozambique is particularly vulnerable to the hydro-meteorological impacts of climate change and has suffered an increasing amount of floods and droughts in the last decade. In 2000, Mozambique was hit by the worst flood in 50 years, which killed 800 and caused economic losses estimated at US$419m. The World Bank also reported that Mozambique is at increasing risk from storm surges (flood of water caused by wind and low pressure) due to climate change and estimates that 41% of the country's coastal area and 52% of coastal GDP is vulnerable.

"The Natural Disasters Economic Loss Index is developed annually by Maplecroft to identify risks to assets and is especially relevant to the insurance and reinsurance industry, which has a large interest in preparedness and response to such disasters," said Professor Alyson Warhurst, CEO of Maplecroft. "Climate change has the potential to raise global temperatures and affect weather patterns - the fear for insurers is that this will lead to more frequent and extreme hydro-meteorological related losses."

According to Maplecroft's low frequency index, it is the small island nations that are particularly vulnerable to the impacts of natural disasters. Geographically they lie in areas of high geophysical hazard risk and often bear the full force of tropical cyclones. They make up 21 of the 27 states rated "extreme" or "high risk" with Montserrat (1), Niue (2), Cook Islands (3), Samoa (4), American Samoa (5), Maldives (6) and Grenada (7) most susceptible.

Swiss Reinsurance Co. estimates that the cost of natural disasters to the insurance industry in 2010 could reach $110 billion worldwide. The earthquake in Chile, on February 27, is estimated to cost $8 billion alone, which is 3.53% of the country's GDP, whilst Windstorm Xynthia in France may cost insurers as much as €2 billion, equal to 0.13% of French GDP. This year's Atlantic hurricane season is also set to be "extremely active" according to the U.S. National Oceanic and Atmospheric Administration, which is predicting 14 to 23 named storms.