Climate change is once again a priority

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This year’s SIRC was once again held on a virtual platform, as various COVID restrictions made a physical conference impossible. But (re) insurers have finished talking about the pandemic and instead focused on the most imminent risks – climate change and sustainability.

In addition to the COVID-19 pandemic, climate change poses short and long-term existential, economic and social risks for the region and the insurance industry must respond by working systematically with policy makers, Singapore’s finance minister said. and Vice Chairman of the Monetary Authority of Singapore. Lawrence Wong, during his opening speech at the conference.

“The COVID -19 pandemic has disrupted global economic activity, disrupted livelihoods and exposed the weaknesses of our global health and social infrastructure,” he said. At the same time, he said the global system continues to face existential challenges, including climate change and cyber risk.

Mr. Wong mentioned that growth in the region would need increased protection of lives, wealth and assets. Highlighting the growth of the insurance market in Asia, which he said was almost twice as fast as the global market and is expected to grow at more than 8% per year until 2030: “The insurance industry can help the economies of the region to seize the opportunities in Asia in the two transformative areas of climate change and digitization, ”he said.

Towards nature-based solutions

During a panel discussion, the director of the Center for Nature-Based Climate Solutions at the National University of Singapore (NUS) and professor of conservation science, technology and policy, Professor Koh Lian Pin, said nature-based solutions are integral to achieving the goals set in the Paris Agreement.

Referring to research done by NUS, he explained how nature-based solutions that encompass the protection, restoration and management of forests can play an important role in reducing carbon emissions. Protecting tropical forests, for example, can potentially prevent 2 billion tonnes of carbon emissions each year.

And then there is also the financial aspect. Assuming conservative carbon pricing scenarios, he said investing in and protecting endangered forests across Asia-Pacific could potentially generate returns of $ 25 billion a year for the next 30 years.

Akanksha Khatri, head of the World Economic Forum on Nature and Biodiversity, said a report by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services showed that climate change is only responsible for 11-16 % of the loss of nature, which means that it is insufficient to mitigate the climate. change and the world must focus on nature-based solutions and the growing narrative of a positive nature.

She added that there is also a $ 10.1 billion opportunity and an opportunity to create 395 million jobs, if the world can move towards more nature-friendly paths.

However, Veronica Scotti, president of Swiss Re solutions for the public sector, said that one of the main challenges right now is that the world does not fully recognize in its economic systems the value of nature.

She said that while nature-based solutions can be profitable, (re) insurers need to arm themselves with the right methodology, tools and metrics that will enable them to recognize the value of nature and added that the Undervaluing nature is part of why nature conservation, restoration and management is not as advanced as it could have been at this stage.

Respond to climate change

In a series of presentations towards the end of the event, Allianz Reinsurance CEO Holger Tewes-Kampelmann spoke about some of the changing trends in Nat CAT events in recent years.

He pointed out that the damage and loss from forest fires has increased rapidly as a direct result of the hotter and drier weather and that this is something that requires more work and research on the part of the industry. (re) insurance.

He also pointed out that changing precipitation comes with increasing flood risk, which has been very evident in recent months in Europe, with recent flooding in Germany resulting in losses estimated at 1.1 billion euros (1.25 billion euros). billion dollars) for the Allianz group alone.

In his presentation, George Attard, CEO of Aon Asia Pacific, said the uncertainty surrounding climate change is creating opportunities for the (re) insurance industry.

He said industry is essential for ensuring resilience and mitigation, and that it can do so by facilitating the flow of capital to green projects and technologies, on both the asset and liability side. He referred to how a recent Blackrock study found that reinsurers have around $ 30 billion in assets and are now considering prioritizing sustainable investing.

On the liability side, he stressed the importance of the industry’s ability to put a price on risk, as this price can send signals on the impact of mitigation and adaptation activities.

Descartes South East Asia Underwriting Manager Robert Drysdale spoke about the role of parametric insurance in covering Nat CAT events, especially floods, droughts and wildfires in Asia -Peaceful.

He said parametric insurance is able to provide extremely broad coverage without requiring standard restrictions such as deductibles, sub-limits, or property damage / business interruption (PDBI) exclusions.

He added that the broader use of parametric insurance does not need to be a zero-sum game and that the capability of parametric (re) assurance can be used to optimize traditional programs and that it is it is possible to structure it parametrically to cover the specific shortcomings of the PDBI programs. .

Industry must combine data sources

When it comes to building models, industry loss and exposure data is always the key, before adding other data sources, said Darryl Pidcock, head of PERILS. for Asia-Pacific.

“Across the industry, people are scrambling to use different forms of data. But the question, of course, is what does that mean? he said. “We know about satellite data and remote sensing data, but I would say… it’s almost a transition period that we’re going through, where we still need traditional industry exposure loss data, but the data real-time scientists that need to be layered becomes more and more critical, especially as there is pressure to make decisions.

The data the industry collects – precipitation, weather, average temperature, crop yields – helps open up markets where previously an insurance product was not available and no historical data can be found, said Christopher Core. , Aon’s agriculture manager for Southeast Asia.

“There was no expertise in distributing a product. There is no expertise in the assessment of losses, no expertise in the rates to be invoiced. And with new data, whether it’s remote sensing, soil moisture for droughts, or NDTV, this new data allows a government to give some sort of safety net to the farmer so that s ‘there is a disaster, they get payment and they will have money to replenish and farm again next year. Insurance can really help make the agriculture industry more sustainable.

However, he noted that one of the hurdles in insurance is that better data does not automatically equate to better insurance products. “You have to remember that at the end of the day the insurance product is for the consumer. Now, for insurance companies and reinsurers, if you get really good data, it just becomes easier and easier for them to price. It’s very transparent. But for it to be a real success, farmers have to want and understand it and they have to buy into it.

The design of the product may not really correspond to what a farmer’s loss is. However, insurers have an advantage in Asia – many of these farmers are not financially savvy and are not familiar with insurance products.

“They’re not used to buying insurance, so they won’t have a compensation product that they can compare to. They won’t necessarily fully understand basis risk, but a huge educational process is required by the insurers, by the government subsidizing all the premiums, and I hope the farmer sees it for what it is. It will not solve all the needs, but it is better than what they had before and it will give them some protection during extreme events, ”he said. A


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