NU Online News Service, June 25, 11:50 p.m. EDT
As prosperity rises in China so does the need for insurance, and the nation needs greater risk transfer penetration as it shares an unusually large burden in catastrophe risk, according to a report released by Munich Re.
The German-based reinsurer said that while the insurance market in China has experienced rapid growth, insurance density and penetration remains relatively low. This is especially true concerning coverage for natural catastrophes, which is not widespread.
"To reduce the burden on governments as the 'insurers of last resort' in the wake of catastrophes, measures for risk prevention and risk transfer are needed, as severe natural catastrophes can have a serious impact on the economic and social development," the insurer said in a statement.
Coupled with climate change, China, and the whole of Asia, are particularly subject to natural catastrophes, Munich Re said.
"Due to its exposure to all weather-related perils, its large population and the fast growth in economic values, China is especially affected by climate change–and will be even more so in the future," said Peter H?ppe, head of Geo Risks Research at Munich Re in a statement. "Over the last 30 years, Asia has been the continent with the largest increase in frequency of weather-related disasters. Loss-relevant events have tripled in number which presents new challenges for all exposed economies."
To underscore this point, Munich Re's NatCatSERVICE database shows that 34 percent of the 850 global natural catastrophes in 2009 occurred in Asia, accounting for 31 percent of overall economic losses. However, only 7 percent of those catastrophe losses were insured.
In 2009, 71 percent of all fatalities from natural disasters were recorded in Asia.
Alluding to the impact of climate change and its impact, Munich Re said that over the last century, the Asian continent has seen the largest temperature increase.
Addressing these concerns during the two-day summit at the Shanghai EXPO, Munich Re said traditional insurance is one way to adapt to climate change, and mentioned some of its more innovative offerings that include:
o The first performance warranty cover for photovoltaic modules (more commonly known as solar cells) that guarantees the instruments will perform at 90 percent of capacity for the first 10 years and at least 80 percent for the next 15 years.
o Cover concepts for the construction and operation of offshore wind power plants.
o Coverage for productivity risks against periods of lower wind activity at wind plants.
o Coverage for the buying and selling of carbon credits.
o Coverage for renewable energy projects against delays or damage caused by technical failures or natural catastrophe.
o Catastrophe bonds, the insurance linked securities to help clients transfer risk of natural disasters to the capital markets.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.