Asia grapples with high underinsurance amid rise in climate disasters

The flooding in the central Chinese province of Henan last year not only exacted a heavy human toll, it was also the costliest in Asia-Pacific in 2021, according to one insurer.

The extreme weather event exposed the enormity of Asia’s lack of insurance protection against the rising severity of climate change related disasters, compared to the rest of the world.

“China is a market where the insurance gap is very large or underinsurance is very high,” said Ernst Rauch, chief climate and geo scientist at Munich Re Group. 

“Last year’s costliest natural disaster in Asia was the Henan floods with an overall loss of $16.5 billion, of which only 10% were insured,” he told CNBC in an email.

In early January, the Germany-based insurance giant released a report, which showed “Asia Pacific as a region lags with a large insurance gap of 83% against the global average of 57%.” It estimated that the region saw overall economic losses of $50 billion in 2021, of which only $9 billion were insured.

The insurance gap refers to the difference in protection coverage between economic losses brought about by natural disasters and insured losses.

The second costliest disaster in Asia was the 7.1-magnitude earthquake off the east coast of Japan in February last year, which incurred huge losses of $7.7 billion, according to estimates by Munich Re. The insured loss was just $2.3 billion, creating an insurance gap of 70%, the report said.