Natural disasters pose ratings threat: S&P Standard & Poor's has delivered its first take of the sovereign-rating threat faced by countries vulnerable to natural disasters, particularly earthquakes and tropical storms. The Dominican Republic, Chile and Bangladesh are the most at risk for ratings downgrades due to freak natural events, the US-based ratings agency found, with Japan rounding out the nations facing potential downgrades of at least 2-notches. Climate change was likely to see the ratings threat increasing over time, S&P also found. The agency simulated the economic impact over a five-year period of one-in-250-year occurrences of either earthquakes, tropical storms, winter storms or floods. "Specifically we view it as possible that storms and floods will become more frequent and more severe as the average global temperature rises and weather patterns shift," S&P chief rating officer Moritz Kraemer said. But Mr Kraemer said the biggest ratings impact was likely to come from earthquakes, followed by tropical storms. The report -- Storm Alert: Natural Disasters Can Damage Sovereign Creditworthiness -- found emerging and developing sovereigns were typically the most vulnerable to natural disasters, and generally had "low" reinsurance coverage. The agency found the level of catastrophe insurance was a key factor in mitigating downgrades, saying a reinsurance level of 50 per cent would see a one-notch downgrade in the case of the five biggest earthquakes, compared with almost two notches for no insurance coverage at all. "We expect that climate change-induced intensification of the frequency and severity of natural disasters would hurt the ratings on poorer sovereigns the most, adding to global ratings inequality," Mr Kraemer said. Dominican Republic headed the Top-10 table for potential downgrades, facing a possible 2.5 notch impact from a simulated 1-in-250-year tropical storm and surge.
Standard & Poor 's ( S&P ) ratings agencies say that rare but extreme natural catastrophes often cause sovereign ratings downgrades , with the largest impacts coming from earthquakes and tropical storm stimulations . " Geographically , populations of sovereigns in Latin America and the Caribbean appear to be most at risk , influenced by Asia , taking into account higher geologic and climatic differences than in the rest of the world " , says S&P analyst Moritz Kraemer . The agency also noted that most sovereigns do not have significant catastrophe risk protection and the levels of cover purchased are often not enough to prevent ratings coming into question . Chile , Bangladesh and the Dominican Republic have been named as most at risk of ratings downgrades due to extreme natural events .