Over the past decade, countries across Asia have become a major force driving global growth, surpassing other regions in economic expansion, innovation, and infrastructure development. This is largely due to the significant progress made by leading Asian nations in upgrading their transportation networks, physical and digital infrastructure, and public services.
However, the region still faces frequent and increasingly severe typhoons and floods, and earthquakes and tsunamis are an ever-present threat. These two factors—the region’s exposure to natural disasters and its increasing economic influence—make it even more crucial to close protection gaps, i.e., the difference between total economic losses and the portions covered by insurance.
From manufacturing hub to economic powerhouse
Asia’s role in the global economy has undergone a dramatic evolution. Once primarily a manufacturing hub, the region plays a key role in global supply chains and is a leader in innovation. It now accounts for over 40% of global GDP, a figure expected to grow further according to the IMF and World Bank.
From semiconductor manufacturers in Taiwan and South Korea to automotive producers in China, Japan, and South Korea, and electronics firms in Vietnam, the region’s leading companies are vital to global trade. While this underscores the region's importance in the global economy, it also presents challenges. Specifically, the increasing significance of the region heightens the risk that shocks not covered by insurance may exacerbate economic instability, thereby impacting not only Asia but also interconnected markets worldwide.
Highly exposed
According to the international disaster database EM-DAT, on yearly average, Asian countries have suffered 157 natural disaster events for the last 20 years (EM-DAT’s Asian region includes China, Japan, and South Korea in East Asia, Indonesia, Singapore, Thailand, Vietnam, and the Philippines in Southeast Asia, and India, Pakistan, and Bangladesh in South Asia). Most recently, the powerful earthquake that struck central Myanmar in March caused significant fatalities and damage in both Myanmar and neighbouring Thailand.
The total estimated damage across the affected areas, including Thailand and Myanmar, reached approximately USD 11 billion. However, the impacts in these two countries show different circumstances.
In Thailand, where many residential and commercial buildings in central Bangkok were damaged or destroyed, insurance payouts are expected to reach approximately USD 1.5 billion. These funds provide liquidity for reconstruction efforts, easing financial pressure on the government and supporting the restoration of confidence and economic activity.
In Myanmar, a country with low insurance coverage due to international sanctions, only USD 85 million of the estimated USD 1.7 billion in economic losses were insured. Without insurance buffers, individuals, businesses, and the government must rely on limited internal resources and uncertain international aid. This lack of financial protection will prolong reconstruction, deepen socioeconomic hardship, and may deter future investment.
The case for proactive protection
Insurance penetration in most Asian countries has not kept pace with economic growth. Although the Asian region has contributed 35-40% to global growth in recent years, the protection gap exceeds 80% in some Asian nations, notably higher than the global average of about 44%. For example, Asia experienced approximately USD 77 billion in economic losses from natural disasters in 2024, well above the region’s 10-year average. Nevertheless, insurance covered only USD 13 billion of these losses, which is less than 17%.
Underinsurance creates systemic vulnerabilities. When disaster strikes, companies that rely solely on their available financial resources take longer to recover. While competitors step in to fill the gap, the reputations and customer relationships of underinsured companies also suffer. Meanwhile, governments contend with enormous fiscal pressures to provide aid and support reconstruction. Facing recovery challenges, local communities and employees endure extended hardships, and foreign investors may reconsider their exposure to disaster-prone, underinsured markets.
Some noteworthy success stories
Although this 17% coverage rate highlights the need for continued progress, it is encouraging to note that countries and companies are implementing proactive measures to narrow the gap.
In China, for instance, significantly improved risk management practices, including business continuity plans and a greater emphasis on prevention, have substantially reduced the risks linked to the country’s frequent earthquakes, typhoons, and floods. Many of India’s large industrial companies have also implemented risk prevention and emergency response plans, although gaps remain in the more rural regions.
Japan provides another leading example. Due to its history of seismic activity, it has developed one of the most comprehensive earthquake preparedness systems in the world, including early warning systems, strict building codes, and community-wide training. Furthermore, its emergency response systems enable quicker recovery after disasters, and strong preparedness fosters a sense of security and trust in public institutions. In short, Japan’s approach demonstrates how investing in preparedness saves lives, reduces damage, and builds long-term resilience.
Furthermore, while the importance of such measures is clear in areas highly vulnerable to natural disasters, countries that have traditionally been spared from such events can no longer assume that to be the case. This includes Gulf Coast nations such as Saudi Arabia, the United Arab Emirates, Qatar, Oman, and Bahrain, where natural disasters have been rare. As a result, the flooding that impacted Dubai in April 2024, causing an estimated USD 2.9-3.4 billion in economic damages, has led companies and policymakers in the region to rethink the adequacy of their property insurance programmes and disaster response plans.
Today, leading businesses work closely with insurers and risk consultants to enhance their resilience. At AXA XL, for example, catastrophe modelling, pre-loss planning, and technical risk assessments help clients better identify their vulnerabilities and refine their response strategies. These services are becoming increasingly valuable as weather-related disasters grow more frequent and complex, and as seismic risks remain a constant threat.
Ultimately, investing in preparedness—including adequate insurance coverage—is an investment in continuity, trust, and long-term value. The lessons from Asia’s history—and its ongoing transformation—offer valuable insights for companies and governments worldwide seeking to adapt to a changing risk environment.
