As vendor catastrophe models and elevated annual losses show that secondary perils have grown in prevalence for the re/insurance and insurance-linked securities (ILS) markets, climate risk needs to be explicitly baked in, according to Kelly Hereid, Director, Catastrophe Research & Development, Liberty Mutual Insurance.
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The insurance marketplace is not that far off a $300 billion loss year and it’s vital reinsurance and ILS markets price adequately for climate change risk, according to David Flandro, Managing Director of Analytics at Hyperion X.
The Climate Measurement Standards Initiative (CMSI), an Australian led collaboration on the physical risks of climate change and their disclosure, has developed a set of open-source, voluntary guidelines to help banks, financial institutions and insurers better assess the risk and quantify the costs of climate-related damage.
Global action to combat climate change is essential to avoid the exposure becoming systemic in nature, which might cause it to become less insurable, according to Munich Re’s CEO of Reinsurance, Torsten Jeworrek.
Following the increased severity and frequency of wildfires, droughts and floods in recent times, the undeniable impact of climate change on water-related catastrophes is starting to get priced in and risk premiums are adjusting, according to Niklaus Hilti, Head of Credit Suisse’s Insurance-Linked Strategies division.
Reinsurance and its ability to transfer risk into a diversified pool of capital can play a vital role in helping the world to mitigate the negative effects of a changing climate and smooth volatility for carbon-free ventures, the CEO of Swiss Re has explained.
Climate change adaptation projects and the need for them are rising up the agenda, as a recent surge in damages from severe weather and climate related catastrophe events concentrates the mind on the importance of investing in this area.
Climate change and how it influences or affects global weather patterns and the frequency or severity of weather related natural catastrophe loss events, is “front and center” for investors right now, while the reinsurance industry in general is increasingly focused on the issue.
Among all the reasons for inflows of alternative reinsurance capital into insurance-linked securities (ILS) slowing down over recent months, Fitch Ratings believes that climate change is a factor.
The U.S. state of California is getting increasingly serious about the use of insurance or risk transfer to provide financing against climate risks and financing to support climate adaptation and resilience building.