Insurance does not reduce the immediate impacts of disaster, but it does provide indemnification against losses. Recently a new insurance scheme in Bangladesh by an insurance company with support from Non-governmental Organisations (NGOs) showed hope to poor people in flood-prone Bangladesh. This is a symbolic scheme. Bangladesh has a long way to go to bring resources under insurance coverage from natural disasters.

1. http://today.thefinancialexpress.com.bd/views-reviews/insurance-coverage-in-bangladesh-a-
long-way-to-go-1546700885
Insurance coverage in Bangladesh: A long way to go
MS Siddiqui | January 06, 2019 00:00:00
The major concerns for the nation can be grouped under five categories.
These are: Finance, Economics and Trade Risks; Geopolitics and Security;
Natural Catastrophe and Climate; Technology and Space; and, Health and
Humanity. The most dangerous threats come from natural disasters and
events like earthquake, tropical and temperate windstorm, tsunami, flood,
volcanic eruption, drought, cold and heat waves etc. These account for a
major portion of annual economic loss. Other risks emerge from digitisation,
and urbanisation followed by concentration of economic activities in the
cities.
Climate change is a growing concern. It is changing the course of weather
leading to extreme weather events. The best solution for climate change
events and natural disasters is insurance coverage against probable disaster
and losses caused by them.
People of third world countries including Bangladesh are not yet sufficiently
motivated for adapting to the practice of insurance coverage despite different
risks and visible impacts from natural and other disasters. It has been
observed that on average, only one-third of global economic disaster losses
are insured and the rest fall under the protection gap.
Insurance protection gaps are prevalent in developing and emerging markets
where combined insurance still fall significantly short of developing countries'
share in global Gross Domestic Product (GDP).
Insurance protection gap is defined as 'the difference between the amount of
insurance that is economically beneficial and the amount of coverage
actually purchased'. The insurance protection gap is hard to measure and
can be subjective. Recently, it has been replaced by an indicator comparing
covered loss to total economic loss.
The uninsured natural disaster losses are at the root of the protection gap
discussion, making the most frequent headlines. The root causes and
prevalence of insurance protection gaps vary widely across the globe,

2. reflecting different stages of economic development as well as social,
institutional and cultural peculiarities.
Insurance can be divided into two categories- life and non-life. Life insurance
covers the death and injury of body while non-life insurance covers a wide
range of assets including property, casualty, motor and health etc. which
faces risks of losses from catastrophic events either natural or manmade.
Developing nations like Bangladesh which are disaster-prone face crippling
losses when storms, floods or earthquakes strike. Their losses could have
been compensated to some extent if they had insurance and other prevention
and protection. Many countries with the lowest levels of insurance are also
among those most exposed to risks from climate change impacts, and are
least able to fund disaster recovery efforts.
Some of the notable incidence of meteorological and geophysical disasters
events include cyclone in Bangladesh (1970), super-typhoons in the Pacific
basin in 2014, earthquakes in Nepal (April, 2015) and Italy (August, 2016),
air traffic disruption following the eruption of Mt Sinabung, Indonesia (June,
2015), and floods in UK and Northern Europe. Droughts continue in western
US, southern Africa, and Serra da Cantareira of Brazil.
Bangladesh, India, Vietnam, Philippines, Indonesia, Egypt and Nigeria all
have an insurance penetration rate of less than one per cent. These
countries are also among the most exposed countries to risks such as
climate change and natural and manmade disasters. A recent study has
observed that real estate remains the best insured sector globally with an
industrial insurance penetration rate of 0.74 per cent, followed by
transportation and storage (0.60 per cent) and agriculture, forestry and
fishing (0.60 per cent). Globally, the manufacturing sector has the lowest
insurance penetration among all sectors, at just 0.17 per cent.
On a micro level, citizens of Bangladesh subscribe to life insurance policies
not because they prioritise financial security of family and personal budget,
but because of aggressive marketing campaigns by these companies.
Bangladesh is yet to initiate social insurance coverage for its citizens.
The ever-increasing risk of natural disasters continues to impact global
underinsurance rates, particularly in Asia, according to new research from
Lloyd's, the world's specialist insurance and reinsurance market, and the
Centre for Economics and Business Research (CEBR). Lloyd's 'Underin-
surance Report 2018' observed that underinsurance continues to represent a
significant threat to global economic development with an estimated US$
163bn of assets underinsured in the world today. Among other things, the
report also revealed that China has the largest insurance gap (US$ 76bn)
due to the size of its economy and its developing insurance market.

3. It has been observed that since Lloyd's 2012 underinsurance report, the risk
profile of the top 10 countries facing the highest risk as a proportion of GDP
has hardly changed. In absolute terms, China has the biggest insurance gap
(US$ 76.4 billion) followed by India (US$ 27 billion) and Indonesia (US$ 14.6
billion). Bangladesh, also has the largest insurance gap relative to GDP (2.1
per cent), in dollar values of almost $ 6bn causing highest probable annual
loss from natural disasters.
The first edition of Lloyd's Underinsurance Report had revealed in 2012 that
there was US$ 168bn-worth of underinsured assets globally. This number
decreased by almost three per cent in six years till 2018. But the gap for
Asian countries has widened by 9.4 per cent to US$ 134bn in 2018 from US$
122.5bn in 2012.
At the same time, the number of risks across the world are increasing rapidly
at pace with economic growth. There is a noticeable increasing trend of
natural catastrophes with 2017 being one of the costliest years for natural
catastrophes in the past decade.
Asian Disaster Preparedness Centre (ADPC) is an intergovernmental
organisation that works to build the resilience of people and institutions
against disasters and climate change impacts in Asia and the Pacific.
Established in 1986, the ADPC ranks Bangladesh as one of the most
disaster-prone countries in the world. More than two-thirds of the country's
64 districts are prone to natural disasters like cyclones, floods, landslides,
tornadoes and drought. Information from their database showed that there
were 234 disaster events between 1980 till 2010. Sixty-eight of these events
were floods that killed nearly 200,000 people. Disasters cost the country
more than half a billion US dollars per year. The physical, social as well as
economic conditions of Bangladesh are similar to any of the most vulnerable
countries to natural disasters in the world. The adverse effects of climate
change - especially high temperature, sea-level rise, cyclones and storm
surges, salinity intrusion, heavy monsoon downpours etc.-have aggravated
the overall economic development scenario of the country to a great extent.
At present, more than 80 per cent of the population is potentially exposed to
natural disasters like floods, earthquakes and droughts, and more than 70
per cent to cyclones. On average, the country experiences severe tropical
cyclone every three years, and about 25 per cent of the land mass is often
flooded. Severe flooding occurs every four to five years, covering 60 per cent
of the land mass. Bangladesh's flat topography, low-lying and climatic
features, combined with its population density and socio-economic
environment, makes it highly vulnerable to many natural hazards. Dhaka,
with high population density, rapid urbanisation and ground water usage for
industrial and household purposes, is one of the most at-risk cities in the
world.

4. Insurance does not reduce the immediate impacts of disaster, but it does
provide indemnification against losses. Recently a new insurance scheme in
Bangladesh by an insurance company with support from Non-governmental
Organisations (NGOs) showed hope to poor people in flood-prone
Bangladesh. This is a symbolic scheme. Bangladesh has a long way to go to
bring resources under insurance coverage from natural disasters.
MS Siddiqui is a legal economist.
mssiddiqui2035@gmail.com