10.4.6.5 Financial aspects

The cost of damages from floods, typhoons and other climate-related hazards will likely increase in the future. According to the European insurer Munich Re, the annual cost of climate change-related claims could reach US$300 billion annually by 2050. The Association of British Insurers examined the financial implications of climate change through its effects on extreme storms (hurricanes, typhoons and windstorms) using an insurance catastrophe model (ABI, 2005). Annual insured losses from hurricanes in United States, typhoons in Japan and windstorms in Europe are projected to increase by two-thirds to US$27 billion by the 2080s. The projected increase in insured losses due to the most extreme storms (with current return periods of 100 to 250 years) by the 2080s would be more than twice the reported losses of the 2004 typhoon season, the costliest in terms of damage during the past 100 years. The cost of direct damage in Asia caused by tropical cyclones has increased more than five times in the 1980s as compared with those in the 1970s and about 35 times more in the early 1990s than in 1970s (Yoshino, 1996). Flood-related damages also increased by about three times and eight times respectively in the 1990s, relative to those in the 1980s and 1970s. These trends are likely to persist in the future.

10.4.6.6 Vulnerability of the poor

Social vulnerability is the exposure of groups of people or individuals to stress as a result of the impacts of environmental change including climate change (Adger, 2000). Social vulnerability emphasises the inequitable distribution of damages and risks amongst groups of people (Wu et al., 2002) and is a result of social processes and structures that constrain access to the resources that enable people to cope with impacts (Blaikie et al., 1994). The poor, particularly in urban and urbanising cities of Asia, are highly vulnerable to climate change because of their limited access to profitable livelihood opportunities and limited access to areas that are fit for safe and healthy habitation. Consequently, the poor sector will likely be exposed to more risks from floods and other climate-related hazards in areas they are forced to stay in (Adger, 2003). This also includes the rural poor who live in the lower Mekong countries and are dependent on fisheries as their major livelihood, along with those living in coastal areas who are likely to suffer heavy losses without appropriate protection (see Table 10.10; MRC, 2003). Protection from the social forces that create inequitable exposure to risk will be as important if not more important than structural protection from natural hazards in reducing the vulnerability of the poor (Hewitt, 1997).