Despite insurers contributing between USD 5 and 5.5 trillion annually to global financial resilience, significant insurance protection gaps remain, especially in developing countries where penetration rates are as low as 2-3%. Increasing insurance penetration by even 1% could significantly reduce the disaster recovery burden on taxpayers, highlighting the importance of expanding insurance coverage.
Recent earthquake events in Turkey, Syria, and Morocco illustrate the critical role of public-private partnerships in disaster risk reduction, social protection, and fiscal risk management. In Turkey, for example, the Turkish Catastrophe Insurance Pool (TCIP) has increased earthquake insurance penetration to 60%—one of the world’s highest rates. Following the 7.8-magnitude earthquake in February 2023, TCIP paid out USD $340.36 million in claims to over 500,000 households, demonstrating the impact of pre-financed insurance solutions.
Similarly, Morocco’s two-pillar system, comprising a National Catastrophe Insurance Pool and a Solidarity Fund, provided substantial support following the September 2023 earthquake. The Solidarity Fund, which covers the uninsured and vulnerable, disbursed US$275 million within weeks, highlighting the importance of pre-funding mechanisms for effective disaster response.
At the recent 18th World Conference on Earthquake Engineering, the Insurance Development Forum (IDF) Secretary General Ekhosuehi Iyahen delivered a keynote address that underscored the insurance sector’s pivotal role in enhancing resilience against earthquakes. With disasters becoming increasingly frequent and severe, the need for innovative, collaborative approaches to preparedness and response has never been more critical.
The insurance sector, traditionally seen as a provider of financial indemnity, has the potential to drive resilience and recovery in unprecedented ways. By mobilising its extensive resources, expertise, and reach, the industry can transform the landscape of earthquake resilience and optimise the use of insurance to build greater resilience for vulnerable communities and institutions.
To further enhance earthquake resilience, the IDF identifies five critical areas for collaboration between the insurance and engineering communities:
- Risk Assessment and Data Utilisation: Insurers possess vast amounts of data on historical losses, damage patterns, and recovery timelines. By harnessing this data and employing advanced analytics, the industry can better understand risk profiles, predict potential impacts, and develop more accurate models. These insights are invaluable for engineers, urban planners, and policymakers in designing earthquake-resistant buildings and infrastructure. Partnerships, such as the one between the IDF and the Global Earthquake Model Foundation, exemplify the potential of collaborative efforts in risk assessment.
- Incentivising Resilient Practices: Insurance companies can encourage proactive behaviour by offering premium reductions for buildings that meet stringent earthquake-resistant standards or for communities investing in mitigation measures. This approach not only reduces potential losses but also fosters a culture of preparedness and resilience. Collaboration with policymakers and regulators is essential to improve the entire ecosystem and promote resilient construction practices.
- Facilitating Rapid Recovery: In the aftermath of an earthquake, the speed and efficiency of recovery are paramount. The insurance sector can streamline the claims process, ensuring that funds are disbursed quickly to affected individuals and businesses. Partnering with local governments and NGOs can support coordinated recovery efforts, helping communities rebuild stronger and more resilient than before. Leveraging engineering capabilities is crucial for constructing resilient shelters and infrastructure swiftly.
- Education and Awareness: Education and awareness are critical components of resilience. The insurance sector, with its extensive customer base, can be a powerful advocate for earthquake preparedness. Targeted campaigns can disseminate information on risk reduction practices, emergency planning, and more. An informed public is a resilient public, and the industry can play a vital role in promoting this knowledge.
- Innovative Solutions and Partnerships: Innovation is the lifeblood of resilience. The insurance sector is uniquely positioned to invest in and support the development of new technologies and solutions. From early warning systems to advanced materials and construction techniques, insurers can drive research and development efforts. Forging partnerships with governments, academic institutions, tech companies, and the engineering community can facilitate the implementation of cutting-edge solutions at scale. Such partnerships are essential to driving innovative solutions that enhance earthquake resilience.
The insurance industry stands at the intersection of risk, resilience, and finance, making it a central player in efforts to mitigate the impacts of earthquakes. A collaborative approach among all stakeholders—insurers, engineers, policymakers, researchers, and community leaders—is crucial for building a more resilient future. Resilience is not a destination but a continuous journey, requiring commitment, innovation, and the unwavering belief that together, we can reduce the human and economic toll of earthquakes.
The IDF thanks the organisers of the World Conference on Earthquake Engineering for the opportunity to advocate for the role that mobilising insurance sector capabilities for resilience can play in creating a safer, more secure world for all.
