Japan, U.S. face most economic risk from natural hazards

Japan and the United States face the highest economic exposure to natural hazards, such as tropical storms and earthquakes, notes a new report from risk analytics and research firm Maplecroft.

Taiwan, China, India, Mexico, the Philippines, Italy, Australia and Indonesia round out the top 10 countries with the highest economic exposure to natural disasters, according to the Natural Hazards Risk Atlas from Maplecroft.

The report assesses 197 countries on physical and economic exposure 12 types of natural hazards, including flooding, storm surge, earthquakes, tsunamis, cyclones, wildfires and volcanoes.

In terms of economic exposure from flooding, the U.S., China, India, Bangladesh, Germany and Japan, face the most risk, followed by the United Kingdom, according to the report.

“While Maplecroft ranks the U.K. as 42nd most at risk for physical exposure to flooding, the country’s high population density and the proximity of commercial centres, private property and infrastructure to areas susceptible to flooding means its total non-agricultural economic exposure to flooding is the 7th highest globally,” the firm says.

However, the U.K.’s resilience is considered one of the best in the world, “due to its spending power and robust infrastructure and institutions,” Maplecroft notes.

“Predictions for the UK suggest climate change is likely to boost the frequency of major storms and increase risks to economic output as a result of flooding,”  Dr. Richard Hewston, principal environment analyst at Maplecroft noted in a statement.

“The future scale of the problem will depend heavily on the government continuing to build resilience and apply resources through flood mitigation and risk management schemes.”

Globally, economic risk is rising as growth continues in countries that are susceptible to natural disasters, such as India and the Philippines, the report notes.

According to Maplecroft’s “Absolute Economic Exposure Index,” the share of global economic output in countries categorised as “extreme risk” in its exposure index is projected to increase from 44.3% to 49.9% by 2025.

Economic losses from natural disasters tend to be higher in advanced economies, but last November’s Typhoon Haiyan in the Philippines caused high economic losses of $10 billion, or 4% of national GDP, the report adds.

“While significant investment opportunities lie in the growth economies, they are exposed to significant natural hazard risks and have a constricted capacity to bounce back when disaster strikes,” Alyson Warhurst, CEO of Maplecroft, noted in a statement.

“The private sector has a critical role in building resilience in these countries and companies engaged in disaster risk reduction will see benefits through greater investor confidence, direct cost savings and improved social licence to operate.”