After a year of disasters (documented in detail here), the reinsurance industry travelled to Monte Carlo for its annual get together (8-14 September).
Hurricane Irma was accompanied last year by Hurricanes Harvey and Maria, along with earthquakes in Mexico and wildfires in California. In all, there was $136bn of insured losses from natural and man-made catastrophes in 2017 according to Swiss Re, the third highest on record.
A report, “Climate Change and the Insurance Industry: Taking Action as Risk Managers and Investors”, was written by Maryam Golnaraghi, Director, Extreme Events and Climate Risk research programme for The Geneva Association, which is described as the industry’s leading thinktank.
It notes that following the adoption of the Paris Agreement, there has been a burst of initiatives and activities across a wide range of stakeholders to support the transition to a low-carbon economy (mitigation side).
Latest developments include:
- growing but highly fragmented and in some cases conflicting climate policy and regulatory frameworks at national to local levels and across regions;
- innovation in clean and green technologies, with some gaining market share;
- rising interest in green financing, with efforts to reduce barriers to green investment on the part of shareholders, asset managers, standard-setting bodies and rating agencies, and growing demand for low-carbon commodities.
As well as building financial resilience to extreme events and other physical risks by providing risk information, improving distribution channels and payout mechanisms, Ms Golnaraghi reports that the insurance industry is supporting the transition to a low-carbon economy through its underwriting business, investment strategies and active reduction of its carbon footprint.
There is no reference to this support in the FT’s report of the insurance industry’s response to escalating disasters, summarised as:
- ‘a wave of merger and acquisition activity’ as insurers and reinsurers reconsider their business models,
- some are ‘bulking up’,
- others have decided to get out.
Reinsurance companies should call for immediate greenhouse gas mitigation efforts, as climate change continues to progress and extreme weather is becoming more frequent and dangerous and heed the Environmental Defense Fund warning that if these are not ramped up, last year’s unprecedented disasters may soon become the norm.