Houston, Texas, 2.00am. I was awoken by a thunderous beating of rain and wind against the house. I got up to see a deluge of almost horizontal rain lit up by lightning that was so frequent that it resembled a strobe light. But you couldn’t hear any thunder as it was drowned out by the noise of the wind and rain. I alerted the family as I wasn’t sure that the house, which like most houses in Texas was built of wood, could withstand the onslaught.
No, this isn’t a tale from last month’s devastating hurricane Harvey which flooded Houston but an experience I had when I lived there some 30 years ago. Consequently I followed the recent events very closely. Even more so as I have clients who have now retired there and they were able to give me a real time report on what was happening. Fortunately they live just north of the overflowing reservoirs and came out of it safely. Thousands of others didn’t. Some 50,000 homes were completely flooded and half a million cars were damaged or destroyed.
Texas was not alone
While the skies were dumping 20 trillion gallons of water on Houston, other parts of the world were also getting a share. It did not draw as much media attention at the time but unprecedented rainfall was also affecting South Asia, including India, Pakistan and Bangladesh, causing a reported toll of over a thousand deaths.
Then, barely two weeks later a category 5 hurricane wreaked havoc across the Caribbean, through Cuba and finally Florida.
So could similar disasters hit Bali?
Absolutely. The global trend to more extreme weather appears to be accelerating and few parts of the world are immune. Why? Theories abound, ranging from inevitable historical climate cycles to deforestation, urbanisation, over-population and carbon emissions. The consensus of scientists is that while there may be some uncontrollable factors there is definitely a link between human behaviour and global warming which in turn is leading to climate change.
There is also a clear relationship between the warming of the oceans and the production of heavy rainfall. The world’s leaders are waking up to this and are moving towards a reduction in the burning of fossil fuels, one of the main causes of global warming. Unfortunately, the world’s greatest consumer of fossil fuels, the USA is going against the trend due to its leader President Trump declaring that climate change is a hoax. Perhaps nature was trying to make a point with the Texan floods and hurricane devastation in Florida, both events the worst in American history.
Heavy rainfall is not the only threat
Geography may ensure that hurricanes and typhoons stay clear of Indonesia but persistent tropical rains can still cause heavy flooding in the plains and devastating landslides in the hilly areas. But other non man-made threats to Bali and much of Indonesia are ever-present due to its proximity to several major geological faults. These can produce destructive volcanic eruptions, earthquakes and tsunamis at any time. Right now, Mount Agung shows signs of coming to life again, 54 years since its last major eruption that killed over 1,500 people in 1963. A similar number were killed in the eruption before that in 1902.
So how can we face all these potential disasters?
While we may never have to personally face a disaster situation the fact is that the chances of facing one are increasing. Good planning is the key to both surviving a disaster and avoiding financial ruin.
Priority of course is survival. Be prepared before an event so that you have an escape plan or in case you cannot escape that you have everything you need to survive for several days while waiting for rescue. Simple things like ample fresh water supplies, non-perishable foods, medicines, first aid kits, torches etc. are not costly items but can make the difference between confidently surviving and desperation or worse.
But how do you survive a disaster financially?
It was reported that 80% of those affected by the flooding in Houston had no flood insurance, in many cases because they were told it was not necessary as they lived in a flood-free area! They may get some state and federal aid but the reality could be far from the promises. It is ironic indeed that Texas senators voted against giving federal aid to victims of Hurricane Sandy some years ago when it hit the north-east coast. When it comes to dipping into the country’s coffers there will be many who will say that taxpayers should not subsidise people who failed to take out insurance.
Clearly the message is that to avoid a physical disaster becoming a financial one make sure you have adequate insurance to cover your home and its contents. And insurance doesn’t stop there. Most people have insured their cars but a surprising number ignore the need for life insurance, despite the potential for financial ruin for dependents should something happen to the breadwinner. Medical insurance is another ‘must’, especially for expatriates. Yes, insurance costs money and it may end up being money ‘down the drain’ but it has bought piece of mind and if called upon can make the difference between full recovery or financial ruin.
Financial security also entails spreading the risk
For many people a home is their main tangible asset. Insurance can protect it but a disaster like the one inHouston can have implications way beyond having your house rebuilt by the insurers. What if you want to move on after the bad memories or fears of a recurrence of the event? Who is going to buy a house in an area where many of the neighbours’ houses may now be derelict? And who is going to buy a house in an area which is now known to be subject to serious flooding? You can apply the same questions in the case of Bali or any other part of the world that is subject to physical hazards or even legal or political uncertainty.
Having assets other than your primary residence is the key to security. Those assets could include investment properties, offshore bank accounts or financial securities in the form of pension plans or portfolios of stocks, bonds and commodities in a safe offshore jurisdiction. A combination of all of these would be ideal. No investment is risk-free, but risk can be drastically reduced by diversification.
At the end of the day it’s the old principle of not putting all your eggs in one basket. It’s still the dry season but keep your umbrella on standby; nature is full of surprises!
Colin Bloodworth, Chartered Member of the Chartered Institute for Securities and Investment (UK), has spent over 20 years in Indonesia. He is based in Jakarta but visits Bali regularly. If you have any questions on this article or related topics you can contact him at colin.bloodworth@ppi-advisory.com, colin.bloodworth@yahoo.co.uk or +62 21 2598 5087
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Copyright © 2017 Colin Bloodworth