Another distressing world first for the Philippines
THE news does not really come as a surprise, but it is still unnerving, coming as it does from a particularly credible source. In a study released on Wednesday, the Swiss RE Institute said the Philippines was the “most impacted” country in the world from “four major weather perils,” and by a margin of about eight times that of the second-most impacted country, the United States. What makes this dubious “World’s No. 1” even more remarkable for the Philippines is that only two of those perils are experienced here.
The Swiss RE Institute is the research arm of the Swiss RE Group, which describes itself as “one of the world’s leading providers of reinsurance, insurance and other forms of insurance-based risk transfer.” It is also one of the oldest, having been founded in 1863.
As a general rule, research by or on behalf of insurance companies tends to be extremely accurate. After all, insurers live or die by how well they measure and forecast risks because if those risks are manifested as actual consequences, the insurers have to pay for them. On a side note, this is also what makes the Tropical Storm Risk website one of the most accurate sources of information when a tropical storm or typhoon appears in our neighborhood; the site provides storm forecasting for shipping insurers.
In its study, the Swiss RE Institute assessed the impact of four types of severe weather in 36 countries. These include floods, tropical cyclones, severe thunderstorms and severe winter storms, all of which are already being intensified by climate change and can be expected to become worse in years to come. Currently, the four aforementioned weather events cause an estimated $200 billion in damage annually worldwide. In the Philippines, the average annual loss is estimated to be $12 billion, or about 3 percent of gross domestic product (GDP). The US suffers an estimated annual loss of $97 billion, but because the country is obviously quite a bit larger than the Philippines, that only amounts to about 0.4 percent of GDP.
Even more remarkable is the fact that the Philippines suffers these losses from just two of the weather perils, floods and tropical cyclones; winter storms are obviously not something that happens here, nor are severe thunderstorms — the kind that produces tornadoes — except on rare occasions. Of the Philippines’ weather-related losses, the larger part — about $10.6 billion — is attributable to tropical cyclones, while the rest is due to floods. In both cases, the Philippines suffers far more economic damage in percentage terms than any other country, by a factor of about 12 with respect to tropical cyclones and about 5 with respect to floods.
Looking ahead, the study implicitly forecasts that the Philippines is likely to continue to be the worst-affected country in the world through mid-century. It is among the countries with the highest risk of “hazard intensification” and has the third-lowest level of “weather insurance resilience,” after Greece and China. Thus, the conclusion is that economic losses will grow, and progressively less of them will be recoverable.
As I said, this is not entirely surprising. It has long been accepted that the Philippines is “one of” the world’s most climate-vulnerable countries, and all this new report does is provide confirmation in one measurable context. It is an extremely important context, however, and one that does not necessarily depend on acknowledging the aggravating factor of climate change. An average annual loss of 3 percent of GDP is no more or less a loss whether the particular weather events that cause it can be directly attributed to climate change or not. To give the problem some dimension, if calamity-related losses were accounted for in GDP calculations, which they’re not, the economic damages would have cut 2022’s GDP growth rate from 7.6 percent to a little more than 4.2 percent.
The economic losses can never entirely be prevented, but they certainly can be reduced and made more easily manageable. Whether policymakers want to call that effort “climate adaptation” or simply “disaster resilience” does not really matter because the job is the same either way. The implied solution offered by the Swiss RE Institute — i.e., buy more insurance — is an understandable suggestion, considering the source. While it is not a solution in itself, it is something that ought to be seriously considered because attaching a price to risks encourages efforts to minimize those risks. And then, of course, if those risks are realized as actual losses, having insurance to ease the blow and recover some of them minimizes the consequences.
Expanded disaster insurance is perhaps an area to which the newly created Maharlika Investment Fund (MIF) could be applied since it still seems to be looking for a reason to exist. Saving the country money, after all, is as good as earning it, and the management of the MIF should give it some thought.