Disaster mitigation investment decisions are complex due to difficulties evaluating the benefits, according to the Actuaries Institute’s Natural Disasters Working Group.

“Actuaries can play a bigger role in assessing when to invest in mitigation actions,” group leader Tim Andrews told the institute’s General Insurance Seminar in Melbourne last week.

“Do we spend $1 billion now to save $5 billion for an event that may only happen once every 100 years?”

Mr Andrews says decisions must look beyond property damage and include intangible costs – such as mental health and personal injury claims – that are not included in disaster damage assessments.

Spending assessments should also consider future changes in risk, such as rising seas or shifts in population.

Another factor is the availability of data. Mr Andrews says there is plenty in the public domain, but individual loss data is hard to source. Some data is not shared due to privacy and competition issues.

“Few insurers have sufficient data to rely on their own,” he said. “There are inconsistencies between maps, measurements being used are not necessarily the most relevant for specific use, and there are issues on the access of detailed data.”

The group has issued its first working paper examining funding for natural disasters in Australia. It estimates natural disasters this year will cost $11 billion, with insured assets accounting for $3.7 billion. The intangible cost of disasters is put at $7.3 billion.

The group will produce another paper next year examining three drivers of risk: economic growth, climate change and demographic change.

It says Australia’s population will rise to 38 million by 2050 and an ageing populace will be more vulnerable to natural disasters.

Some 20% of Australians will be aged over 65 by 2050.