Insurance and reinsurance remained at the heart of recent discussions on disaster and climate risk reduction and resilience efforts at the United Nations, with regulatory reform highlighted as required to make risk transfer more available.
In the last few years the activity surrounding climate and disaster risk has accelerated and the insurance and reinsurance industry has gained a seat at the very highest levels of this discussion.
Last week, the International Insurance Society held its annual event in New York and a number of panels were held at the United Nations in the city, as insurance came together with global political will to push for solutions to make disaster and climate risk transfer more available to the world’s poor.
Secretary General of the UN, Ban Ki-moon, welcomed the involvement of the insurance and reinsurance sector in the discussion of sustainable development goals, saying; “It is encouraging to see the commitment of the insurance community from over fifty countries to advance the global sustainability agenda. This is a critical year for action. ”
“Climate change impacts are accelerating. Weather-related disasters are more frequent and more intense. Everyone is affected, but not all equally. We must especially help the poorest and most vulnerable people. A disaster can wipe out decades of development gains overnight,” the Secretary General continued.
“The insurance industry can play an important role, especially in helping to ease the financial burden associated with disasters and to protect the vulnerable. Disaster risk reduction is a front-line defence against the impact of climate change,” he explained.
The opportunity for insurance and reinsurance industry leaders to step up to the requests for help from the UN are clear. With a goal to expand insurance penetration, help nations recover from disasters and put in place risk transfer to protect against changing climate conditions, re/insurance involvement is key.
However, regulation has been cited as an issue which holds back insurance penetration from increasing.
Speaking at the UN event Dr. Ana Gonzalez Pelaez, a Cambridge Institute for Sustainability Leadership fellow and expert in human rights law, said that inclusive insurance regulation needs to be explicitly mentioned in the Sustainable Development Goals (SDG’s).
“The lack of effective insurance regulation is a problem for accessing insurance across all parts of society,” Gonzalez told the BBC.
“My role was to highlight the policy implications of having insurance at the centre of requirements to protect exposed populations,” she explained, highlighting the fact that some countries do not allow mutual insurers to be formed.
“The lack of regulation can have devastating consequences for customer protection and also insurers cannot really grow if the regulatory environment is not supportive,” Gonzalez Pelaez continued.
Gonzalez Pelaez called for inclusive insurance regulation to be added to the UN Sustainable Development Goals (SDG), citing them as a historic opportunity to formalise the involvement of the insurance and reinsurance sector in growing access to disaster risk protection.
As the discussion now turns towards access to insurance being a right, the involvement of the industry becomes even more vital to help steer the development of initiatives to enable the world to become better protected against disaster losses.
Ultimately, the provision of insurance and reinsurance capital will help economies and countries to recover more rapidly from disaster and climate impacts, as well as to foster resilience by ensuring risk transfer is in place for projects that are invested in.
The opportunity to help the world become more resilient to disaster and climate impacts is clear, with risk transfer, insurance and reinsurance sorely needed to support and enable governments to invest in resilience in a sustainable way.
For investors in the ILS space, the opportunity to put capital to work in disaster exposed risk transfer investments which are also providing a way for the world to meet its SDG goals, should be a compelling investment prospect. As a result the ILS market could play an important role in making the risk transfer capital required to support these efforts available.