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Perfect Storm of Risks Ahead

Perfect Storm of Risks Ahead


By Stuart Spencer, CEO, APAC, General Insurance, Zurich

Each year, the World Economic Forum, together with risk experts including Zurich, forecasts the key threats facing the world. In 2016, the Global Risks Report has revealed a failure of climate change mitigation and adaptation as the highest-impact risk that we collectively face.

But in a region that is striving to become the world’s undisputed growth engine, is the impact of climate change really something for Asia Pacific to prioritise above the economy and other issues?

Listing the risks

Ask Asia Pacific’s business executives, and they decisively confirm their priorities are economic: they consider energy price shocks to be the top risk for doing business, closely followed by asset bubbles.

Only two of their top ten perceived risks are environmental – despite our region having been significantly affected by major catastrophes. Recent examples range from man-made disasters, like Tianjin and the Shenzhen construction collapse to natural catastrophes such as the devastating floods in India last year, the Nepal earthquake in 2014, Cyclone Haiyan in the Philippines, and the 2011 Japan earthquake and tsunami.

The trouble is, the impact of climate change is intrinsically bound to economic prosperity. And the economically-driven actions being taken today are increasingly closely linked to significant environmental and social impacts.

If we do not act, the consequences predicted for Asia Pacific include forced population displacement, reduced food security, local food crises, unprecedented heat extremes in summer in South East Asia, more floods, business disruption caused by flooding and water shortages, and widespread knock-on challenges for multi-national corporations.

What are at stakes?

Asia is one of the fastest urbanising regions. By 2050, two-thirds of the world’s population – an estimated 6.3 billion people – will live in cities.

Urban development requires significant investment in infrastructure, and those cities, which lack well-planned transport links, experience increases in city congestion and pollution levels. This saps productivity and affects life expectancy.

Delhi and Beijing are among the cities that have already hit the headlines this year, as intolerable air pollution and traffic congestion have ground their workforces and populations to a halt.

Rapid and unplanned urbanisation has the potential to drive the spread of infectious diseases – are businesses prepared for widespread business interruption if large numbers of employees fall ill?

Living and working in a dense urban environment takes its toll, which can in turn cause a potential emigration of talent, as bright, skilled people depart for destinations with cleaner air.

Businesses start to alter their financial decision-making too. They may move capital and investments from Asia, favouring alternative locations with more sustainable development opportunities. Without change, our region will face a perfect storm that will ultimately put APAC’s long-term growth in danger.

The insurance industry has a critical role to play in supporting economic activities that help people, communities and businesses increase resilience and adapt to what we know to be inevitable changes – in an environmentally-conscious and sustainable manner.

The first step is to raise awareness. Businesses need to invest in low-carbon energy and environmentally-friendly technology, educating people about how to behave sustainably, helping communities, like Bukit Duri in Indonesia, that are affected by disasters to rebuild better and more safely, and innovating in areas such as climate-informed crop insurance.

With so much at stake, and so much more to play for, if Asia Pacific can balance economic and environmental priorities, our region will not only protect its impressive progress and achievements to date, but also continue to thrive in the future.

About the Author

Stuart joined Zurich in 2013 as CEO of Zurich’s General Insurance Business in the Asia Pacific region. He has over 18 years’ experience in the general insurance market and has broad knowledge, expertise and leadership capabilities as well as a strong understanding of the Asian insurance landscape.