Report says insurers must change to achieve climate resiliency

Insurers need to fundamentally change their business models if they are to achieve climate resiliency, according to a new report by Capgemini and Efma. The World Property and Casualty Insurance Report suggests that only 8% of insurers can be considered ‘resilience champions’, despite widespread acceptance that the effects of climate change are directly impacting on the industry.

An increasing number of weather events are negatively impacting the insurance industry with insurers being expected to both protect and prevent against future damage. The report says that globally, economic losses driven by climate change have increased by 250% in the last three decades. It also notes that 73% of policyholders rank climate change among their top concerns, and insurers share those concerns, with about 40% ranking climate change as a top priority, with insurability and profitability as leading climate-related issues.

The report says that to adequately address the issue of climate resiliency, insurers must revisit their own business models and balance risk prevention with risk management, encouraging insurers to rethink current risk assessment models, deploy risk prevention at scale, and drive sustainable investment and underwriting strategies, moving beyond exclusions and divestments, to create a resilience ecosystem.

Among insurers deemed as ‘resilience champions’, some are taking important climate-related steps. 82% have a chief sustainability officer or equivalent, while almost 77% have embedded climate-risk data in their products and services. More than half (53%) are accessing new data sources, including satellite data, remote sensors, weather stations, geo-data, social media data, ESG models, and water levels to provide accurate, granular, and real-time risk information.

Seth Rachlin, global insurance industry leader at Capgemini, said: “The impact of climate change is forcing insurers to step up and play a greater role in mitigating risks. Insurers who prioritise focus on sustainability will be making smart long-term business decisions that will positively impact their future relevance and growth. The key is to match innovative risk transfers with risk prevention and assign accountability within an executive team to ensure goals are top of mind.”

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Deborah Ritchie speaks to Chief Inspector Tracy Mortimer of the Specialist Operations Planning Unit in Greater Manchester Police's Civil Contingencies and Resilience Unit; Inspector Darren Spurgeon, AtHoc lead at Greater Manchester Police; and Chris Ullah, Solutions Expert at BlackBerry AtHoc, and himself a former Police Superintendent. For more information click here

Modelling and measuring transition and physical risks
CIR's editor, Deborah Ritchie speaks with Giorgio Baldasarri, global head of the Analytical Innovation & Development Group at S&P Global Market Intelligence; and James McMahon, CEO of The Climate Service, a S&P Global company. April 2023