China logs biggest protection gap against natural disasters

The country has been plagued with major flooding events in the past years.

Out of 10 major markets in the world, China has logged the biggest protection gaps against natural disasters at 95% for 10 years since 2011, according to research by Swiss Re.

The report revealed that the country is especially vulnerable to floods, storms, and earthquakes. Large scale events like the 2021 Henan floods, the 2020 Yangtze River floods, and Typhoon Fitow in 2013 have been the main drivers of natural catastrophe losses in the country.

From 2011 to 2021, China suffered a total economic loss of $298.4b, with only $15b recorded as insured losses. This brings a total of $283.4b in uninsured losses. According to Swiss Re, flood is the most regular and destructive threat in China.

“While almost any low-lying part of the country is vulnerable, the basins of the Pearl, Yellow, and Yangtze rivers are most at risk. Even Shenzhen, which has no major rivers, is considered to be exposed to catastrophic flooding on a 1-in-50 year basis,” Swiss Re said.

Because of these, amongst other high-growth markets, China has the biggest flood potential with 52% of its industrial areas exposed to river flooding and 25% exposed to storm surges.

A driver of economic losses

It’s not surprising to find out that the natural catastrophe that China is most at risk of floods because according to Swiss Re extreme flooding events drove high economic losses in 2021, amounting to $82b globally, which accounts for 31% of global economic losses from natural catastrophes. 

Despite the world being at risk from floods, only $20b of the losses in 2021 were insured, leaving a 75% protection gap.

“Growing losses from floods are becoming ever more apparent. Last year we had another wake-up call. There is a growing urgency for action to increase the resilience of societies worldwide. Together with the public sector, re/insurers are well equipped to steer development away from high-risk areas and invest in protective measures such as green infrastructure. This keeps assets insurable whilst also improving the growth outlook,” said Jérôme Jean Haegeli, Swiss Re's Group Chief Economist.