#15 Understanding the present and forecast the future of Natural Hazards with Panos Giannnatos, Fabrizio Di Tirro and Eduardo Quevedo

The impact of Natural Hazards differs greatly from region to region and increases in severity each year. Although we want to give you some insights into how Natural Hazards evolved in certain parts of the world and how climate change fostered these developments, we also want to have a look at what businesses can do to tackle these challenges and why insurers have to step up – combining their knowledge on global risk landscapes with sustainability goals.

Meet our interviewees and experts for this month's newsletter edition:

What are the main Natural Hazards in your country, and what role does climate change play?

Fabrizio Di Tirro: Where to start? As I like to say in webinars, conferences, lectures and workshops, I live in the most NatCat-exposed country in Europe: Italy.

The Italian North-South faults generate one of the most vulnerable countries to earthquakes. Additionally, we have some of the most threatening volcanoes in Europe, such as Vesuvius, scientifically capable of exploding with seismic and especially pyroclastic effects throughout an area with a population of 3 million people. Undersea volcanoes such as the Marsili crater could also lead to tsunamis along the Italian coastline.

Beyond that, we are hit severely by  droughts and wildfires caused by the rise in temperature and unexpected weather phenomena such as snow in summer. Long series of storms, hailstorms, and yes also floods are not a rarity anymore, as 2022, 2023 and 2024 have shown as well. And the ‘Medicanes’ – hurricanes generated in and impacting the Mediterranean Sea – as well as landslides, are empowered by the consequences of climate change: higher sea temperatures, heavy rainfalls, and soil water saturation. I could continue for pages, but I’d rather hear how our Mediterranean neighbours in Greece are faring.”

Panos Giannatos: Thank you, Fabrizio. Like Italy, we’ve experienced an increase in storms, especially during winter, with heavy rainfalls, high winds, hail and –almost as surprising as it was for you, Fabrizio– heavy snowfall. The consequence was many more flood events, from surface water floods to flash floods.

But what came quite as a surprise was the increase in tornadoes. Although they are not nearly on the same scale as in North America and tend to dissipate quickly, the tornadoes' intensity already caused human casualties and property losses. As our Italian neighbours across the Ionian Sea, we also see an increase in wildfires due to the rise in temperature, especially in vulnerable areas such as rural and forested regions.

But how’s the situation across the world in Mexico, Eduardo?

Eduardo Quevedo: There are two major events to consider due to our positioning on a convergence of several tectonic plates, Panos: geological phenomena such as earthquakes and tremors and hydrometeorological events such as hurricanes and storms. I think no one will be surprised that seismic activity is a regular occurrence in Mexico, which is why we’re often hit by earthquakes of differing magnitude, with notable events happening in 1957, 1985 and 2017. Additionally, we can “boast” a dedicated hurricane season from June to November due to our humid and hot climate and sea temperature regularly exceeding temperatures above 26°C. 

Fabrizio Di Tirro: As a side note: Although the actual and indisputable fact remains that the climate is changing, impacting everyone’s life and, from our insurer's perspective, generating NatCat events, we must also consider that due to the highly connected and globalised organisation of businesses, resilience to Natural Hazards decreased greatly, amplifying the consequences of climate change empowered phenomena.

What challenges do businesses face now?

Panos Giannatos: Building upon what Fabrizio just said, the challenges faced by our clients range from physical damage to their property, to operational disruptions, increased insurance costs, and the growing complexity of risk management. On a regional level, we see businesses in fire-prone areas being increasingly at risk of losing property to wildfires. In recent events, hotels, restaurants, and agricultural businesses have been severely affected. Flooding, particularly flash floods, has damaged commercial properties, especially in low-lying regions or near rivers and coasts. Strong winds and Mediterranean cyclones (Medicanes) can destroy buildings, disrupt ports and shipping, and damage crops and infrastructure. Greece’s economy is also highly dependent on the tourism sector, which is very vulnerable to Natural Hazards deterring tourists.

On a global level businesses that rely on just-in-time supply chains or international trade are particularly vulnerable.

For example, wildfires or floods can disrupt transportation networks, making it difficult for them to receive materials or deliver products on time, and this can also lead to customer loss. Also concerning is the fact that recovering from events often involves more than just rebuilding: businesses must also navigate complex regulations and incur additional costs related to mitigation and compliance.

So, what can be done to be more prepared for the impact of Natural Hazards?

Eduardo Quevedo: In the case of earthquakes, their destructive impact can be mitigated through the construction of earthquake-resistant buildings.

Panos Giannatos: Exactly, Eduardo. And beyond that, businesses may need to invest in protective infrastructure, such as flood defences, firebreaks, or reinforced buildings – proactively or due to regional regulations. But to really get a business through a time of crisis, a Business Continuity & Preparedness Plan is essential to tackle such problems that could lead to losses.

Fabrizio Di Tirro: Of course, insurers can help with Business Continuity & Preparedness Plans and continuous risk mitigation. Additionally, we can give clients an additional helping hand by thoroughly studying these phenomena, gathering expertise in these areas, and remaining updated as several reliable organizations, universities, etc., are involved in understanding the changes and revising return times. Especially the last part is something we would also recommend to businesses around the world.

So, what exactly is the role of insurers in this constellation, and how does sustainability tie into it?

Panos Giannatos: Fabrizio already pointed out the most important task for insurers such as HDI Global: risk mitigation.

Insurers are in a unique position to influence businesses and individuals by aligning their risk management and coverage options with environmental sustainability goals. Technical expertise is the key component of driving change among the insurance market and insured clients.

We can also use our data and expertise to educate clients about the increasing risks posed by climate change through detailed Risk Assessment Reports that highlight the specific climate risks they face, based on location and industry. We can host events and webinars to discuss climate risks and how sustainable practices can mitigate those risks. Acting as our clients’ preferred Partner in Transformation, we seek to provide advisory services on how to implement more resilient and eco-friendly infrastructure to minimise future claims

Conclusion

Ultimately, the key for both insurers and businesses is to take proactive steps BEFORE an incident occurs. By working together, they can create resilient infrastructures – whether in construction, business continuity, or eco-friendly practices.

From Italy, to Greece, to Mexico – these are just glimpses into global challenges. But what’s your take? How is your region being impacted by recent developments? We’d love to hear your perspective.