Business Can Break Barriers to Disaster Mitigation

As recently as 1976, the Tangshan earthquake in China killed at least 250,00 people. That's the official estimate. Disinterested observers put the figure at more like 650,000. Yet, this deadliest natural catastrophe of the 20th century happened, effectively, behind closed doors. The cultural revolution had just come to an end. A fierce power struggle raged within the top ranks of the Communist Party. There were few if any outside observers, and offers of outside help were refused.

How different was the tsunami that so devastated southeast Asian on 26 December 2004. Not only were we all aware of the unfolding tragedy, but the development of global tourism meant that in addition to nine countries that suffered directly, another 40 or more other countries were affected because their nationals were killed or injured. The worldwide network of communications from television to internet, not fully exploited to provide better warning of the tsunami, nevertheless informed the world of the devastation after the event. The result was a global expression of compassion.

Sadly, Munich Re came away disappointed from the second UN World Conference on Disaster Reduction held in Kobe, Japan in January 2005, less than a month after the tsunami. Prof. Dr. Peter Hoppe, the new head of Munich Re's geo risks research, and natural catastrophe expert Thomas Loster were the sole representatives of the private insurance industry among 4,000 participants from 168 countries at the event. They found that overall the results of the conference were unsatisfactory. National interests tended to take precedence over effective help for those worst affected by natural disasters.

Even in wealthy, well insured United States, six months after four major hurricanes - Charley, Frances, Ivan and Jeanne, plus tropical storm Bonnie - Florida was not back to normal, according to a report from Church World Service published on the UN Relief Web site on 17 March 2005. Over a six week period from 12 August 2004, the five storms systems caused an estimated $60 billion in damage to the state. Ten thousand homes were completely destroyed and at least 120,000 residents were displaced. "As many as 60,000 residents are still in need of permanent housing across the state," says the report. The state's agricultural sector took a major blow losing nearly 20% of its citrus crop, which in turn affected more than 25,000 farm labourers.

The poorest suffer worse. Tropical storm Jeanne's heavy rains created violent flash floods in north western Haiti where the official death toll stands at over 1,800, with more than 800 people missing. "Deforestation, poverty and a general lack of preparedness were the major causes of the disproportionately high loss of life as high waters drowned hundreds of people and buried a large region in mud," says the International Federation of Red Cross and Red Crescent Societies (IFRC)

Moderating an International Monetary Fund (IMF) seminar on the state of Grenada's recovery six months after hurricane Ivan, Paul Nehru Tennassee, National Coalition on Caribbean Affairs (NCOCA) & Carib Nation TV, said: "Natural disasters rank very high as a major constraint to sustained development and improved living standards for citizens of the Caribbean. We now cannot strategise and formulate development policies without making allowance for possible disasters."

For business, geographically extenuated dependencies create new business continuity issues, and multiple events exacerbate the demand surge that normally follows a catastrophic event. Because there were multiple storms, the larger than normal surge in demand for building skills and materials has created exceptional shortages, not just increasing prices but resulting in delayed and inadequate repairs which may increase vulnerability to other losses.

The high price of oil has played a part in increasing the financial impact of the Atlantic hurricanes. It has pushed up the cost of some building materials and transport for supplies from further away. It has increased the cost of oil and gas production stoppages in the Gulf of Mexico.

These events and their consequences demonstrate how closely linked the natural and now human systems of the world are; major events do not happen in isolation. Earthquake, tsunamis and windstorms are no respecters of national boundaries. Business, especially the reinsurance industry, has operated internationally for many years and has a great deal to contribute from its store of experience and knowledge to overcoming barriers to disaster mitigation.