The financial sector does not have access to enough information on the changing weather and climate according to a new report from the United Nations. The survey of 60 financial institutions found that just one third felt sufficiently informed on climate change and concludes that these organisations need better access to weather data and climate information to enable them to effectively manage climate and weather risks.
The survey and report were jointly managed by the UN Environmental Programme Finance Initiative (UNEP FI) and Germany’s Sustainable Business Institute. You can download the full report here (in PDF format).
The report looks at responses from 11 re/insurance companies who were surveyed and, perhaps surprisingly, even in the re/insurance sector there is a call for more information to help climate preparedness. The report notes that the re/insurance industry is facing new challenges due to shifting climate patterns and are recording variations in severity and frequency of weather disaster events, which is expected to continue and could increase.
Of the eleven re/insurers (from 8 countries across 3 continents) who were surveyed:
- 10 recorded an increase in weather-related damages, and 11 expect these to increase
- 8 reported an accumulation of such risks, and 9 expect accumulation risks to increase
- 8 expect risks to change, and 9 anticipate these changes will accelerate in future
- 7 insurers have recorded a demand for additional risk transfer (or risk absorption) capacity and 10 said they expect that this demand will continue to grow
- 7 said that amendments to insurance products are happening and 11 said that will become unavoidable
- 9 said they are developing new insurance products and 11 said that they plan to do so in future
The report notes that as insurers are already adjusting product portfolios to meet the demands of a changing climate it is likely that going forwards business development and strategy in the re/insurance industry will increasingly be driven by climate and weather change related factors. These changes also provide opportunity for innovation and new products to provide cover for emerging and increasingly severe weather risks.
The key challenge for re/insurers, the report says, ‘lies in adequately identifying, quantifying, and pricing such risks amidst a dynamic environment’, all challenges that relate to the quantity, quality and granularity of weather and climate projection data available to them.
When asked about the availability of historical weather data and climate change predictions, more than half of the survey respondents felt that the levels of information available today were not sufficient.
The report goes on to discuss methods for jointly developing climate services, the role of public and private sectors in provision of information and further action that is required. It’s well worth taking the time to read.