Lack of insurance coverage in Southeast Asia threatens an increasingly important hub for supply chains as the region is hit by tropical storms, major floods and other natural disasters.
Total losses from natural disasters in the Asia-Pacific region last year totaled $73 billion, while only $9 billion was insured, according to the German reinsurance company. Munich Re. This makes Asia one of the least insured regions in the world against natural disasters. (For comparison, 70% of disaster losses in North America, or $133 billion, have been recovered.)
The second costliest disaster last year occurred in Asia: March’s 7.7 magnitude earthquake in central Myanmar. The earthquake resulted in losses of $12 billion, of which only $1.5 billion was insured. It is also the deadliest disaster of the year 2025, with 4,500 deaths.
Insurance coverage can be less than 5% in many low-income Asian countries, such as Myanmar, Laos, Cambodia and the Philippines, according to Munich Re.
The lack of reliable climate data in Asia makes it difficult for insurers to accurately assess risks, says Benedikt Signer, executive director of insurance company SEADRIF, the first regional disaster risk management mechanism in Asia, developed in partnership with the World Bank. In data-scarce environments, international insurers do not know how to assess risk, enter the insurance market, or “deal with the government.”
Governments also sometimes view insurance as a “waste of public funds, because from a public procurement perspective, when you buy something, you need a good or service in return,” says Signer. “But with insurance, what you buy is intangible and you don’t get anything back unless there’s a payment.”
The lack of insurance coverage in Southeast Asia threatens “a critical hub of global supply chains,” says Janice Chen, Munich Re’s head of property treaty underwriting in Southeast Asia. “Inadequate insurance coverage increases the risk of economic shocks that spread across borders. »
Agriculture and manufacturing dominate Southeast Asia’s economies, with the region producing 30% of the world’s rice and more than 80% of palm oil.
Climate disasters have a significant impact on farmers in the region, leading to reduced yields, poor harvests and increased pest numbers due to extreme heat and flooding. They are also impacting logistics and supply chains in the region, damaging critical infrastructure and causing delays in shipping goods.
Without insurance, vulnerable populations can be hit even harder by the loss of their assets and infrastructure.
“If you don’t have the savings to rebuild and it’s not insured, you can lose your home,” says Signer, noting that disaster losses often also lead to consumption losses. “When you don’t have the money to respond, you pull kids out of school or sell the limited assets you have just to survive the next three days, months or years.”
SEADRIF, based in Singapore, offers a parametric insurance policy that covers flood risks in Southeast Asia. Their unique model offers rapid, predetermined payouts when specific weather thresholds, including wind speeds, precipitation levels or temperatures, are met or exceeded. SEADRIF was able to pay $1.5 million in insurance compensation to Laos just one day after the August 2023 floods.
Besides insurance, to reduce climate vulnerability, governments can also put in place physical defenses like sea walls and flood barrierswhile deepening partnerships with multilateral organizations such as the Asian Development Bank and the World Bank.
This story was originally featured on Fortune.com
