The insurance sector must begin to deal with the growing number of adverse weather events and above all with the consequences that these cause on the sector.
According to the World Property and Casualty Insurance Report, published by Capgemini and Efma, the economic losses caused by climate change have increased globally by 250% in the last thirty years. The increase in insured losses was 3.6 times, while the increase in uninsured ones stops at 2 times. Not surprisingly, 73% of policyholders today consider climate change to be a major concern. A sentiment shared by companies, who fear above all for the insurability of these risks (74%), for the pressure on profitability (72%) and for the costs of regulatory compliance (54%).
Unfortunately, there is still a long way to go: nowaday, according to the research, only 8% of companies can be considered "front runners" or "resilience champions", i.e. in possession of solid governance, advanced data analysis skills, strong focus on risk prevention and able to promote resilience through underwriting and investment strategies.
To go from words to deeds, the insurance industry must review its business models and develop a "climate resilience framework". How? Rethinking current risk assessment models, making better use of available data, implementing large-scale risk prevention, promoting sustainable investment and underwriting strategies and going beyond simple exclusion and divestment activities, in order to create an ecosystem of resilience.
According to the report, the companies indicated as "resilience champions" can be identified according to some very distinct elements: 82% have appointed a chief sustainability officer or equivalent; nearly 77% have integrated climate risk data into their products and services; about 60% are at an advanced stage of implementing pricing models based on machine learning and about 53% are using new sources of risk data, including satellite data, remote sensors, weather stations, geo-data, data from from social media, ESG models and water levels to deliver more accurate, granular and real-time information.
How to become a "resilience champion"? The report indicates three key actions necessary to fuel climate resilience pathways within companies. First, companies must incorporate climate resilience into their corporate sustainability strategy, assigning strategic actions to senior executives to ensure ownership and accountability. Second, they need to redefine their innovation approach to bridge the gap between long-term goals and short-term planning by integrating resilience into their value chain. Finally, they must redesign the strategy focusing on product innovation, customer experience and corporate citizenship, through the integration of technologies such as the internet of things, cloud, artificial intelligence, machine learning and quantum computing.