Climate change tops list of concerns in Netherlands

Climate change is the main concern for Dutch risk and insurance managers, according to leading members of Narim taking part in this year’s Risk Frontiers Europe roundtable. This is perhaps not surprising given that about a third of the Netherlands lies below sea-level.

A recent study commissioned by the Netherlands National Flood Protection Program (HWBP) found that the 1,000 residents surveyed are now more afraid of natural disasters such as dike breaches, flood and drought, than in the last survey carried out in 2020.

More than half (54%) think their children’s grandchildren won’t be able to live in the Netherlands because of this risk.

A third (29%) think the country will become uninhabitable within 100 years.

These fears have been exacerbated by the extreme rainfall in July 2021 across western Europe. This caused severe flooding, including over 200 fatalities and extensive infrastructure damage within Germany, Belgium, Luxembourg and the Netherlands, and resulted in economic losses of more than €50bn.

So when Dutch risk managers were asked to identify the big three risks it came as no surprise that the answer was: Climate change, climate change and climate change!

Annemarie Schouw, manager of risk and insurance at Tata Steel Nederland, stressed that climate change and the required transition presents a huge challenge to risk managers at European companies.

“It is not just a question of climate change but also the way the whole economy operates,” she pointed out.

The wider political and economic implications of the climate-driven need for change is clearly a concern for Dutch risk managers and their peers across Europe.

Most agree that the transition to net zero is needed and desirable, but working on the front line trying to help Europe’s leading corporations make this transition is clearly no easy task.

Action groups are placing high-profile pressure on corporations to make the transition at breakneck speed.

From a more practical perspective, there has been a growing groundswell of support for public private partnerships (PPPs) to tackle some of the systemic risks brought by climate change.

The participants of this roundtable agreed with their peers across Europe that PPPs are a positive way forward if constructed and managed well, with a clear focus on loss prevention and risk management as well as transfer.

They are also clearly frustrated by the recent knee-jerk retraction of the insurance industry from key lines, not least property and natural catastrophe. Improved partnership is needed.

“Maybe the main question is: Are the insurers willing to go along with the evolution of these risks so that they become trendsetters or not?” asked Jeroen Gruter, corporate insurance manager at TBI Holdings.

Another survey participant wryly pointed out: “The insurers said we can’t insure these risks because we don’t have the data, much to the surprise of many!”.

One of the big problems for insurers trying to identify and measure emerging risks is the interdependencies caused by globalisation of the supply chain and reliance on digital solutions.

These factors combined clearly intensify and accelerate the risk and raise systemic fears.

Schouw suggested that AI could provide a solution. “AI can help identify these interdependencies and enable the insurers to broaden their view,” she said.

Karin Volgers of Royal Boskalis Westminster said clearly a more joined-up approach is needed, with a sharper focus on loss prevention and risk mitigation.

“If you look at the flooding in the Ardennes in 2021 then you have to say there are big lessons to be learned in terms of public planning and the like. This will happen again and governments and local authorities need to be involved,” she said.

It is interesting to find that with each major risk and insurance challenge nowadays, often a call for PPPs arises as the market ‘fails’.

This became very clear when Covid-19 hit and businesses across Europe catastrophically realised that they were not covered for business interruption losses unless their carrier had adopted a cavalier approach to wordings.

For the vast majority of risk and insurance managers in the Netherlands and across Europe, the debate remains open about PPPs for cyber and pandemics.

But it seems that national or pan-European pools at an EU-level for natural catastrophe risks not already dealt with are a ‘no-brainer’.

As the OECD stated in a 2021 report: “Ultimately, increasing the level of insurance coverage through the establishment of catastrophe risk insurance programmes can contribute to reducing the fiscal costs of catastrophe events – and potentially at a relatively low cost given the few occasions where programmes have needed an injection of public funds. For governments, the establishment of a programme should carefully consider the potential cost and impact relative to investing directly in risk reduction as well as the relative effectiveness of responding to low levels of financial protection ex ante through an insurance arrangement rather than ex post (including any cost of setting aside capital to backstop a programme).”

Once again it seems the risk and insurance management profession potentially has a key role to play in this critical area for companies, individuals and governments across Europe, and can add serious value for all. Rise to the challenge.