The Asian Catastrophe: An Unprecedented Event Evokes a Global Response

Certain events mark each generation, but as the scope of the disaster that struck 12 countries around the Indian Ocean on Dec. 26 emerges, it has become evident that it will haunt not just the present generation, but many future ones as well. The images, transmitted by television and the Internet, gave graphic testimony to nature’s raw and destructive power.

Earthquake triggers seismic waves
The idyllic beginnings make the scenes even more horrific. People relaxing on the beach stare entranced as waves gather offshore and begin their inexorable march toward land. Low-lying islands in a tropical paradise bask in the sun as the sea gathers strength. The waves continue to roll shoreward, growing immense, overwhelming boats and bathers. The cameras, mostly wielded by tourists on vacation, convulse, then go blank or show only disjointed images, as walls of water engulf everything. Afterwards the endlessly repeated views of the destruction reveal carnage resembling the bombed-out moonscapes of cities destroyed in World War II.

A war didn’t do this, however, an earthquake did–the most powerful tremor the world has experienced in 44 years–magnitude 9 on the Richter Scale. The U.S. Geological Survey, National Earthquake Information Center–World Data Center for Seismology in Denver issued a report shortly after the event. It was a “megathrust earthquake,” that “occurred on the interface of the India and Burma plates [also referred to as the Australian and the Eurasian] and was caused by the release of stresses that develop as the India plate subducts beneath the overriding Burma plate.”

After describing the interaction of the two plates the USGS said: “Preliminary locations of larger aftershocks following the megathrust earthquake show that approximately 1,200 kilometers [720 miles] of the plate boundary slipped as a result of the earthquake. By comparison with other large megathrust earthquakes, the width of the causative fault-rupture was likely over 100 kilometers [60 miles]. From the size of the earthquake, it is likely that the average displacement on the fault plane was about 15 meters (46.5 feet]. The sea floor overlying the thrust fault would have been uplifted by several meters as a result of the earthquake.” In short, the ocean floor rose/fell by as much as 50 feet along a fault 60 miles long, located 155 miles (250 kilometers) northwest of Banda Aceh on the Indonesian island of Sumatra. The displacement of billions of tons of water created a series of seismic waves or tsunamis, the first of which hit the coast 15 minutes later.

The waves, which travel at speeds up to 500 mph (800 kph) in the open ocean, struck the low-lying Andaman Islands, west of the epicenter 30 minutes after that. They continued to fan out over the breadth of the Indian Ocean. Ninety minutes after the quake they crashed over Phuket and other areas of northwestern Thailand; two hours later they thundered ashore along the coast of Sri Lanka and Southern India; three and a half hours later they inundated the Maldives, and finally seven hours later they hammered the coast of Somalia in East Africa 3,000 miles (5000 kilometers) from the epicenter.

The precise death toll will never be known, but it has already surpassed 150,000—-104,000 in Indonesia alone, 30,500 in Sri Lanka. Hopes are fading of finding any of the missing thousands, including an estimated 4,500 foreign tourists. Around five million people have been left homeless. The economic impact is beyond comprehension. Infrastructure and local services have been wiped out. The region is a war zone without the war (although in several places it has that too). The tropical heat, the lack of sanitary facilities, the rotting corpses, pose the threat of widespread outbreaks of disease–cholera, typhoid, malaria, dysentery and others–all of which disproportionately strike the young and the injured.

Worldwide rescue efforts
The rest of the world, however, has not stood idly by. The initial reaction–stunned shock–quickly passed into a global upwelling of help. Disasters are usually local, and aid agencies, often under United Nations auspices, can concentrate their efforts, but this tragedy hit 12 countries at once. Coordinating relief efforts poses a major problem. Pleas for funds have elicited a global response. This has enabled aid agencies and local governments to obtain emergency supplies–food, clothing, tents, medical equipment, water purification systems, etc.–and to engage people on the ground to deliver them to the survivors. Although some remote areas remained isolated, the world’s response has been remarkably fast given the extent of the need.

Funds continue to pour in to pay for the massive effort, as countries around the world have pledged significant amounts and private donors are lining up to contribute. A unique disaster has triggered a unique response, unlike any previous experience.

To its credit the insurance industry has been one of the leaders in fund-raising. The day after the disaster American International Group Chairman, Maurice R. “Hank” Greenberg, issued a statement calling the events “a tremendous tragedy that resulted in a huge loss of life, and left millions of people in need of help.” He announced: “AIG and the Starr Foundation will be contributing to relief efforts, and AIG employees are being encouraged to contribute to the AIG Disaster Relief Fund. Their contributions will be matched 100 percent.” The Starr Foundation, established in 1955 by AIG’s founder, Cornelius Vander Starr, has since pledged $2.5 million.

Perhaps inspired by AIG’s largesse, an increasing number of the world’s global insurers have added their pledges of aid. In no particular order:

— Allianz announced that it would donate one million euros ($1.36 million) and would reveal further details of its plans for helping those stricken by the disasters.
— Zurich will donate $1 million and will match up to $1 million in charitable contributions made by its employees.
— AXA set up accounts for its employees to make donations and will match them by donating at least one million euros [$1.32 million] to emergency relief efforts.
— The Chubb Corp. established a $1 million fund for disaster relief efforts and will match contributions by its U.S. and international employees to such organizations on a two-for-one basis.
— ACE established the “ACE Tsunami Relief Fund,” to which employees around the world can contribute and have their donations matched by the company. Additionally, the ACE Foundation will make a significant contribution to one or more major relief organizations.
— Swiss Re made donations to two organizations, Caritas and AID India, as an initial contribution. It plans further donations, eventually totaling $1 million. It will also match the amount raised by employee contributions.
— A slightly smaller organization, Insurance Journal, will also match any donations made by its employees to Asian relief efforts.
Governments and official bodies have spearheaded the relief efforts. Although the first pledges were somewhat meager, when the horrendous scope of the tragedy unfolded, up went the amounts.

As reported by CNN, Australia topped the list with pledges of $815 million. Japan pledged $500 million; $530 million from the European Union; the United States $350 million; the World Bank $250 million; Germany $660 million; the U.K. $96 million; $675 million from the Asian Development Bank (ADB). A number of African countries, who are probably poorer than the recipients, pledged funds. Even North Korea will provide $150,000. Over 50 countries have so far pledged their aid in funding relief and rebuilding efforts.

An equally extraordinary response came from private citizens.

CNN also reported that Germans gathered a whopping $333 million, the Netherlands with a population slightly over 16 million raised $148 million; $187 million from the U.K.; Australia $106 million; France $50 million; $324 million from the United States; and more than $100 million from Saudi Arabia. Private donations from many countries–the U.K., Austria, Greece, Ireland, The Netherlands, Switzerland and others–exceeded the official pledges.

Some problems have emerged. A recent UN Conference in Geneva, held five days after the meeting in Jakarta, where most of the aid was pledged, stressed the need for funds now. Much of the money was pledged as future loans, debt relief and long term rebuilding financing. The Indonesian Army in Banda Aceh is reportedly interfering with aid efforts that could go to areas controlled by rebels. The UN has taken steps to avoid the kind of criticism its handling of the “Oil for Food” program in Iraq has received by appointing PriceWaterhouseCoopers to oversee aid donations and assure transparency.

Insured losses comparatively low
As more than one commentator has remarked, the lack of insurance coverage is one reason so much aid money is needed. The industry finds itself in a difficult situation, as it can hardly apologize for not having large losses, but it can’t really express a great deal of satisfaction about the fact either.

“Insurance coverage in Aceh is limited primarily because of the troubles that have affected everyday life in Aceh,” said Crawford & Co.’s Executive General Adjuster Paul Hough from Indonesia. “There are logistical difficulties when dealing with any incident on this scale,” Hough added. “However, these difficulties are compounded by the troubles that have recently affected this region of Indonesia, where separatists are seeking to break Aceh away from Indonesia. This has resulted in insurers being reluctant to open offices in the region and provide coverage.” Hough said the number of claims submitted to insurers for property damage have been small thus far.

In its bulletin expressing condolences to the victims, Lloyd’s said it expects its exposure “to be limited to holiday resorts, personal accident, travel insurance and marine risks.” Munich Re said its preliminary loss estimates were below 100 million euros ($132 million). Swiss Re estimated they’d be less than 100 million Swiss Francs ($88.5 million).

The London-based International Underwriting Association, however, indicated the losses could be more substantial. IUA Chief Executive Marie-Louise Rossi said that according to the current best estimates from IUA member companies total insured losses are expected to range between $5 to $10 billion. In an interview with the BBC she stressed that under the circumstances gathering information continues to be quite difficult, as “it’s still quite early in the process.”
For most of the victims, however, it’s too late. “The vast majority of the world’s population has never heard of an insurance policy, let alone are able to purchase one,” stated Rich Moseanko, a relief director for World Vision, the Christian relief and development organization. “Further, governments of poor countries can barely meet ongoing social service needs, let alone provide a safety net like FEMA. Disaster survivors must bear these costs alone.” The problem is they can’t do it alone, and that bears further discussion.

While the insurance industry will not generate huge claims in Southeast Asia, in a sense it has a broader responsibility. Insurance is essentially a luxury limited to those that can afford to buy it. Insurers are after all private entities, not relief organizations; they do need to make profits in order to stay in business. However, insurance is a vital component of economic growth and ultimately of social stability. Helping to reestablish that in the countries hit by the tsunamis will ultimately benefit everyone.

For information on charitable organizations aiding tsunami relief efforts, visit: www.insurancejournal.com/tsunami.

Topics Catastrophe USA Australia AIG Earthquake