Climate change has resulted in higher frequency and magnitude of natural calamity events, especially floods. These floods have huge economic impacts, causing widespread damage to business and residential properties and disrupting the lives of the community.
According to FM Global, flood is the world’s costliest natural hazard and one of the most common. Nearly a third of industrial locations around the world are vulnerable to flooding, due to reasons such as proximity to rivers or drainage systems becoming overwhelmed from the volume of rain.
“Southeast Asia has more exposure to the effects of a changing climate than most, due to global warming, cities being situated at or below sea level, and urban development and infrastructure located in flood-prone locations, according to a report by the Intergovernmental Panel on Climate Change,” said Yong Seek Ying (pictured above), vice president and division engineering manager, Asia-Pacific, FM Global. “Without rapid investment in climate resilience, flooding will continue to be an expensive headache for businesses, governments, and communities across the region.”
According to Yong, recent flood events in Malaysia demonstrated the devastating impact of flooding on communities and businesses. This led the country’s insurers and policymakers to deal with the economic fallout of flooding on business, which has been estimated to have caused US$1.46 billion in losses, based on data from Malaysia’s Department of Statistics. This is just a fraction of the overall impact of natural hazards. A study from Aon also showed that economic losses from natural disasters in Asia-Pacific stood at US$78 billion in 2021, with flooding accounting for a large percentage of this sum.
“Alongside the rising flood risk, rising sea levels across the region present an increasing threat, with Singapore’s concerted response delivering a portent reminder of the urgency to act,” Yong told Insurance Business. “Singapore has established a SG$13.4 million (US$9.63 million) Coastal-Inland Flood Model – the country’s first computer modelling system that can help predict how sea-level rises and how heavier rain could impact the nation. The Centre for Climate Research Singapore has also launched a National Sea Level Programme, setting aside SG$10 million over 5 years to update projections of Singapore’s key climate variables including rainfall, temperature, and sea level, to help Singapore better prepare itself for flooding episodes driven by a changing climate. This indicates a level of seriousness and demonstrates commitment to resilience that businesses can follow.”
Singapore is more prepared than most countries in the region, with other countries remaining vulnerable. These include Malaysia and Indonesia, where parts of the latter’s capital, Jakarta, are predicted to sink into the ocean by 2050, forcing plans to relocate it. Thailand, the Philippines and Vietnam are also no strangers to perennial and severe flooding events. Most countries in Southeast Asia have extensive coastlines and heavily populated low-lying areas and islands, making them prone to floods. These countries are also home to much of the region’s industry including manufacturing and heavy industries, forming the world’s fifth largest economy when combined.
Directly or indirectly, the region’s businesses will be impacted by most of the costs resulting from the impact of floods on property losses and related supply chain disruptions, which can affect a company’s value and reputation.
According to Yong, while the current climate trajectory and the continued impacts of floods on businesses in Southeast Asia, the majority of losses remain preventable if appropriate action to mitigate risks are taken. Businesses that understand the need for climate resilience can act now to examine what they can do in the short, medium and long term to become more resilient to flood risk.
“Businesses can first use the diagnostic tools available to assess whether their properties are located in areas vulnerable to flooding, be that riverine flooding, coastal flood risk, or surface water due to heavy rainfall,” Yong said. “Understanding these variables are an important first step in considering the impact to property and the appropriate mitigation strategies that are unique to each location.”
One important area of action for the short term is to assess what business-critical assets a company needs to maintain in the case of a climate-related event, and if so, what can be done to protect their property assets or infrastructure.
“In the mid-to-long term, businesses should look at the alignment of their sustainability strategies and business objectives,” Yong said. “While some sustainability initiatives may have a positive impact on emissions, footprints, and budgets, they may also increase a company’s risk exposure. Take for example solar panel installations, where the addition of a renewable energy source can be balanced against the increased fire risk due to the use of combustible materials and its environmental impact, or the potential damage caused to roofing where panels are damaged during high-wind events.
“Climate change is often perceived as having a slow-moving impact, but if the increasing economic impact on Asia is taken as an indicator, then it is becoming more dynamic. The rise of flood risk across the region is a stark reminder that flood and climate risk will keep evolving, and that building climate resilience is an urgent business priority for owners of property and infrastructure and those reliant on robust supply chains.”
This article first appeared in Insurance Business Asia.