Climate change is predicted to have a significant impact on certain economies in Asia in the future, with six nations in the region – the Philippines, Thailand, China, Taiwan, India and Japan – ranking in the top 10 most vulnerable among the 36 nations studied, according to a recent report.

Already, extreme weather events like heavy precipitation and severe storms, including tropical cyclones, cause significant economic losses of an estimated US$200 billion globally every year, finds the report published by Swiss Re Institute, entitled “Changing climates: the heat is (still) on”.

The report, which is based on findings from the United Nations’ Intergovernmental Panel on Climate Change, analyzes where hazards are likely to intensify and overlays it with its own estimates of economic losses resulting from the four major weather hazards of floods, tropical cyclones, winter storms in Europe and severe convective storms.

In general, countries with sizeable insurance protection gaps, and those where the establishment of loss mitigation and adaptation measures lags the rate of economic growth, are most financially at risk from hazard intensification.

The Philippines, with annual economic losses of 3% of GDP, is currently the most impacted by the four weather threats, as well as being exposed to a high probability of hazard intensification.

China and India, the report notes, have both already experience significant weather-related losses (more than 0.2% of GDP). However, the probability of future hazard intensification in China is more than in India.

The inference is that in the future, China may be exposed to potentially higher weather-related losses as a percentage of GDP than India. In China, tropical cyclones are the main loss driver, while in India, both flooding and tropical cyclones are the main risks.

Source: Swiss Re Institute, 2024

“Climate change is leading to more severe weather events, resulting in increasing impact on economies,” says Jérôme Jean Haegeli, Swiss Re’s group chief economist. “Therefore, it becomes even more crucial to take adaptation measures. Risk reduction through adaptation fosters insurability.”

“The insurance industry is ready to play an important role by catalyzing investments in adaptation, directly as a long-term investor and indirectly through underwriting climate-supportive projects and sharing risk knowledge. The more accurately climate change risks are priced, the greater the chances that necessary investments will actually be made.”

The first step towards cutting losses, the report emphasizes, is to reduce the loss potential through adaptation measures. Examples of adaptation actions include enforcing building codes, increasing flood protection and carefully monitoring settlement in areas prone to natural perils.

Ultimately, losses as a share of GDP of each country, the report concludes, will depend on future adaptation, loss reduction and prevention.