and Climate Risk
The Geneva Association conducts research that promotes the
role of insurance in mitigating the societal impact of extreme
events and climate risk. It explores ways in which the insurance
industry, as underwriters and investors, can support the transition
to a resilient low -carbon economy and contribute to the
Sustainable Development Goals.
and Climate Risk
The Geneva Association conducts research that
promotes the role of insurance in mitigating the
societal impact of extreme events and climate risk.
It explores ways in which the insurance industry,
as underwriters and investors, can support the
transition to a resilient low -carbon economy
and contribute to the Sustainable
and Climate Risk
The Geneva Association conducts research that promotes the role of insurance in mitigating the societal impact of extreme events and climate risk. It explores ways in which the insurance industry, as underwriters and investors, can support the transition to a resilient low -carbon economy and contribute to the Sustainable Development Goals.
Over the last 30 years, catastrophe loss models (‘Cat models’) have revolutionized the (re)insurance industry’s capacity to assess, price and manage disaster risks. Few sectors of the economy play a role as intense in catastrophe recovery as insurance; therefore, the industry should strive to continually strengthen its Cat modelling capabilities.
The report, published in November 2018, indicates that in line with the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures, more sectors are considering physical climate risk in their core business and investing methodologies. Cat models, if properly conditioned to climate change scenarios, could be utilised to understand the impacts of weather-related risk on assets, operations and investments and to develop risk mitigation measures. Already the financial sector and governments recognize and leverage the value of Cat models in making risk-based decisions.
The insurance industry, with its extensive experience in catastrophe risk modelling, can make a significant contribution to the next generation of Cat models. Embedding the latest climate science and data, such as advanced hazard simulations or innovative engineering perspectives on physical damage, would go a long way in reinforcing the value proposition of Cat models.
Furthermore, Cat models should embrace a systems-based approach by connecting them with other modelling systems such as those applied in economic analysis, the water-food-energy nexus and infrastructure and health systems. This could result in improved policymaking, planning and risk management decisions.
The study analyses the interplay of risk reduction, risk prevention and risk transfer measures for building socio-economic resilience to floods in five countries: Australia, Canada, Germany, the U.K. and the U.S. The project looks at flood risk from the perspective of customers, governments and the insurance industry, and explores the role of policy and regulation as well as incentive mechanisms for flood risk mitigation and post-event response and recovery. Academic partners include the London School of Economics, the Wharton Business School and the University of Waterloo.
Critical infrastructure constitutes the backbone of a functioning economy. Interruption in critical infrastructure could cause significant harm to populations’ well-being and hinder economic growth. Therefore, investing in climate resilient and decarbonised critical infrastructure is fundamental to addressing both economic and environmental goals.
This discussion paper, prepared for The Geneva Association’s 2018 Extreme Events and Climate Risk Forum, provides a review of the complexities, risks and opportunities associated with critical infrastructure by looking at how the full life cycle of infrastructure projects is affected by climate change.
Extending the value of Cat models requires a multi-stakeholder endeavour: Maryam Golnaraghi
The event, co-hosted by Intact Financial and Sun Life Financial, took place in September 2018 in Toronto and gathered top officials from the UN, OECD, the World Bank, institutional investors and leaders of the insurance industry to discuss the role of insurers in enhancing infrastructure resilience to climate risk and mobilising long-term private capital into low-carbon infrastructure projects.
Public policy and regulation are key to making climate resilience a prerequisite for infrastructure projects. Governments also play a critical role in implementing risk reduction measures such as land use zoning, upgrading and enforcing building standards, and recovering and maintaining natural infrastructure, such as wetlands. Further, emerging technologies are leading to ‘smart and green’ infrastructure systems, and governments and the private sector must cooperate to ensure appropriate risk assessment for such advanced systems.
Investing in infrastructure could offer life insurers a good match with long-term liabilities as well as enhanced portfolio diversification. Institutional investors should engage with non-life insurers not only to protect the physical assets but also to mitigate the climate risk profile of infrastructure projects across their full life cycle. This would improve expected returns and make infrastructure investments more attractive.
Tsuyoshi Nagano, President and CEO of Tokio Marine welcomes participants
Panel on private investments in climate resilience - Masamichi Kono, OECD; Marcia Moffat, BlackRock; James Hempstead, Moody’s Investor Service
Panel on view of CEOs on climate-resilient infrastructure – Hiroshi Ozeki, Nippon Life (Americas and Europe); Dean Connor, Sun Life Financial
Patricia Espinosa, Executive Secretary of UN Framework Convention on Climate Change
Panel on critical infrastructure – Amanda Lang (moderator), Bloomberg; Robert Palter, McKinsey; Joaquim Levy, World Bank; Brian Deese, BlackRock; Michael Mylrea, Pacific Northwest National Laboratory
Public policy is necessary to make climate resilience a requisite for infrastructure: Charles Brindamour
Insurers need to work with regulators to ensure capital charges are fair and balanced: Dean Connor
Infrastructure climate resilience should be addressed urgently: Tsuyoshi Nagano
Regulation alone will not incentivize private investment in climate-resilient infrastructure: Mami Mizutori
Pipeline of investable opportunities and data needed to scale up green investments: Maryam Golnaraghi