Natural disasters have unfortunately become too common events that have a dramatic impact in terms of human lives, but also bring significant material damage with economic and financial implications, direct and indirect, on an increasing number of people, both due to the increasing intensity of catastrophic events and the growing interrelationship of activities affected by them. Among the wide range of catastrophic events, it is common to distinguish between two main categories: high-frequency phenomena with moderate intensity; and events with a very low probability, but much more serious intensity and implications. The first are probably more directly related to climate change and human action, including droughts, floods, fires, tornadoes, or convective storms. The second category includes major geological movements such as earthquakes, tsunamis, or tsunamis, which are much rarer but have much more devastating effects, in terms of loss of human lives and material losses.
A recent study published by AON (‘Climate and Catastrophe Insight’) provides a wealth of statistical data on natural disasters that have occurred during the 21st century on a global scale and their distribution by categories and geographical location. Historic series of damages, both personal and material, show a certain stability when chronic events prevail, which are less individually harmful but much more frequent. According to the mentioned study, these events cause the death of around 50,000 people per year and have associated economic losses exceeding 100 billion dollars, with a great consensus and scientific evidence regarding their relationship with climate change. In Spain, chronic events predominate, associated mainly with droughts, fires, or floods, claiming around 40 lives each year, a number that has approached a hundred in years of heat waves, such as 2003 and 2019.
The economic losses derived from this type of chronic events are much more difficult to quantify than in the case of large “geological” events, which involve massive destruction of infrastructure and buildings. Afi’s Global Business magazine dedicated its February issue to estimating the losses associated with chronic catastrophic events, for which it is necessary to estimate both direct effects (loss of value of affected assets by destruction or temporary inability to use) and indirect effects, using input-output tables methodology to capture the chain effects of this temporary disruption in productive assets. According to these estimates, losses in Spain would be around 3,000 to 5,000 million euros annually. Along with quantifying the economic losses associated with natural disasters, the degree of insurance coverage for these events is a highly relevant aspect. Data indicates that insurance coverage for chronic events is much higher than for sporadic events, but with significant divergences between geographical areas, with the United States showing the highest level of insurance against chronic risks, especially tornadoes and convective storms, where more than 60% of the damages would be insured. Spain presents a high level of insurance, around 50%, higher than the European average and much higher than in other geographic areas.
The unpredictability of such extreme events, and their extraordinary morbidity, makes their insurance much more complex, and much lower than in the case of chronic events. Therefore, prevention becomes much more important when facing these extreme events. Furthermore, the availability, granularity, and interrelation of data related to natural disasters are increasing, which is essential to effectively manage and prevent disasters with a focus on prevention rather than disaster management. The Sendai Framework for Disaster Risk Reduction 2015-2030 from the United Nations, agreed upon in 2015, focuses on understanding disaster risk, strengthening disaster risk governance, investing in disaster risk reduction for resilience, and enhancing preparedness for an effective response and better reconstruction. In Spain, in addition to having a disaster risk management framework consistent with climate change adaptation, there are several institutions and instruments considered best practices at an international level. These include the Consortium of Compensation of Insurance (CCS) for extraordinary risk coverage, the Military Emergency Unit (UME) created in 2005, and the ES-ALERT alert system administered by the Directorate General of Civil Protection and Emergencies, which was active from February 2023 in compliance with a European Parliament directive.
