The global threat of rising sea levels and warmer sea surface temperatures as a result of climate change is an area in which the entire risk transfer landscape must increase its efforts, and capitalise on the opportunity to improve resilience, according to risk management and reinsurance industry experts.
Speaking to ratings agency A.M. Best at the 2016 RIMS conference in San Diego recently, executives and experts from the insurance and reinsurance sector again emphasised the need for the industry to increase its efforts surrounding climate change and its risks.
“The one scientifically credible fact is that sea levels are rising, whether that’s cyclical, whether that’s man-made, is the area of worldwide debate,” said Swiss Re Managing Director, Jamie Miller, highlighting just how much uncertainty and discussion remains regarding the influence and impacts of climate change on sea levels and natural catastrophes events.
Following agreements made in Paris last year during the COP21 meeting of governments, risk transfer solutions and tools have been repeatedly noted as an important part of the fight against climate change, with insurance, reinsurance and ILS capital all set to play an important role.
The need to improve global disaster resilience and mitigation efforts in the face of the potential of more intense and frequent natural disasters, as a result of climate change, is an issue suited to the capabilities and capacity of the risk transfer world.
Insurers, reinsurers, and insurance-linked securities (ILS) players have the skill set, knowledge and capital to make a meaningful impact on improving the social and economic stability of vulnerable, poorer countries both before and after an event takes place.
The topic of risk transfer and climate change is an ongoing one and will likely remain a hot industry topic for some time to come, supported by the continued push for further innovation and effort from insurers, reinsurers, and risk managers from industry executives at RIMS.
“Climate change has actually been voted as the 2016 most likely trend to impact global business developments, so it’s something that we in the risk management community really need to pay attention to.
“It is not enough just to protect ourselves anymore against the traditional property perils for example, there’s a broader scope of risk that we have to look at on the climate front,” said Linda Conrad, Head of Strategies Business Risk, Zurich.
Liz Berge, Property Facultative Chief Underwriter, Gen Re, shared the view that rising sea levels and warmer sea surface temperatures needs to be taken seriously by the industry.
Berge explained that warmer “sea surfaces are also causing more volatile and intense hurricanes and rapid intensification,” noting hurricane Patricia as an example.
The threat of rising sea levels poses great danger to coastal cities, agricultural and transit industries, says Miller, a trend that could increase the number of homes and businesses exposed to flooding events and storm surge in the future quite considerably.
John Neal, Group Chief Executive Officer (CEO), QBE, also agreed that the data surrounding climate change was there to be seen, also stressing that the risk transfer landscape must put “a lot more effort into understanding climate risks.”
“Both to pre-empt exposure and help our clients and our insureds to manage the risks in advance of an event. But also ensure that our services and capabilities are ready so when the event occurs we can help them get back on their feet,” continued Neal.
Zurich’s Conrad also noted the potential opportunity for insurers, reinsurers, and risk managers to have a meaningful influence on climate risks, “We have an opportunity now to do more assessment work, and more mitigations so starting to look more broadly at business resilience efforts for example,” she said.
The opportunity and necessity for the entire risk transfer world, including risk modellers, insurers, reinsurers, ILS players and beyond, to start to innovate and create solutions that protect economies across the world against the threat of climate change is huge.
The opportunity for re/insurers and ILS funds/managers to access diversifying risks and regions is something that should support an increased effort from companies to battle climate change as well.
But as highlighted by speakers at RIMS, it’s important companies, governments, and other entities from both the public and private sector work together to improve global resilience and mitigation efforts in light of the threats of climate change.