2017-2018
ANNUAL REPORT

EXTREME EVENTS 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 and explores ways in which the insurance industry, as underwriters and investors, can support the transition to a low-carbon economy.

RESEARCH REPORTS

Climate Change and the Insurance Industry

The report Climate Change and the Insurance Industry: Taking Action as Risk Managers and Investors is based on interviews with 62 C-suite level executives of globally active insurance and reinsurance companies, and offers insights into the role of the (re)insurance industry in addressing climate change adaptation and mitigation goals. The study, released in January 2018, has confirmed that climate change is a topic that has made its way up to the boardrooms of the insurance industry, despite the fact that insurers are neither the polluters nor the policy setters.

Key findings of the study include the following:

1. The insurance industry is already taking action in addressing the climate change challenge.

  • Insurance companies provide leadership in risk modelling and pricing, knowledge of preventive measures and innovation in risk transfer solutions—all of which enable building socio-economic resilience to climate change, incentivise reduction in greenhouse gas emissions, and promote entrepreneurial pathways for clean technologies.
  • Insurers are evaluating portfolio strategies that increasingly integrate climate change considerations.

2. There are a number of external hurdles that hinder the expansion of the insurance industry’s contributions to climate change adaptation and mitigation.

  • The expansion of effective risk transfer solutions is currently impeded by limited access to risk information and lack of incentive to take up insurance due to post-disaster government aid.
  • Additionally, the scaling-up of green investments is inhibited by factors such as a limited capacity of markets to accommodate large-scale portfolio allocations, a need for well-defined asset classifications, and fragmented climate policy and regulatory frameworks.

3. Executives interviewed indicated that climate resilient and decarbonised critical infrastructure represent an opportunity that poses specific challenges for the insurance industry.

  • Insurance companies require risk data to assess such infrastructure projects throughout their lifecycle—from design and construction to operation and maintenance.
  • Additionally they require a stable regulatory and political framework, a robust pipeline of opportunities, and an efficient market.

Guidelines for Risk Assessment to Support Sovereign Risk Financing and Risk Transfer

The paper, released in June 2017 and prepared in collaboration with the Insurance Development Forum (IDF), provides governments with a framework for conducting the risk assessment underpinning national risk transfer programmes. In order to adequately quantify the risk context, governments should partner with multiple stakeholders including the insurance industry, risk modelling experts and data providers. Through public-private partnerships, governments can benefit from the insurance industry’s holistic risk management expertise.

The report was developed in response to a request from the United Nations Office for Disaster Risk Reduction (UNISDR). It also supports the adoption of the Sendai Framework for Disaster Risk Reduction 2015-2030, the 2030 Agenda for Sustainable Development, and the Paris Agreement.

ONGOING STUDIES

Innovating Risk Modelling to Reshape Disaster and Climate Risk Management

This study intends to explore ways for a more coordinated approach to catastrophe risk modelling. It offers insights from 20 leading experts from the industry, risk modelling firms, the scientific community and the international development community. The intent of the paper is to look into ways to utilise current methodologies and knowledge to improve risk management and risk transfer measures, leverage scientific and technological advancements to enhance current methodologies, expand CAT risk modelling for critical infrastructure, and envision the development of the next generation of risk models. The paper was informed by the outcome of the 2017 Extreme Events and Climate Risk (EECR) Forum.

Comparative Analysis of Flood Risk Management

Formally launched in October 2017, the study aims to analyse the interplay of risk reduction and risk transfer measures for building socio-economic resilience to floods in seven countries: Australia, Canada, Germany, Japan, Spain, the U.K. and the U.S. The project will look at the issue from the perspective of customers, governments and the insurance industry, and will explore the role of policy, regulatory and institutional frameworks across government levels as well as incentive/disincentive mechanisms. Academic partners include the London School of Economics, Wharton Business School and University of Waterloo. A task team has been established, engaging experts from 15 member companies.

CONFERENCES

Global Platform for Disaster Risk Reduction

This biannual meeting, organised by the UNISDR, took place in Cancun, Mexico on 24-26 May 2017. The Geneva Association leveraged the high-level leaders’ forum, plenary sessions and technical discussions to raise awareness of the value proposition of the insurance industry towards an integrated approach to disaster and climate risk management.

Globe Capital Conference

Maryam Golnaraghi, Director EECR, participated as a speaker in the panel Climate Adaptation: Is Canada Investing Aggressively Enough to Mitigate the Risks? at the conference organised on 4-5 April 2017 in Toronto. The session explored whether the level of investment and speed of deployment at the federal and provincial levels is adequate to protect Canadians.

Building Sustainable Flood Insurance Solutions

The event took place in Berlin on 9-10 May 2017 and brought together leading figures from science and academia, non-governmental organisations and the (re)insurance industry to examine the rapidly growing impact of flooding and explore measures to significantly reduce that impact. The Geneva Association was represented by Maryam Golnaraghi.