French risk managers say insurers are not rewarding climate risk mitigation
AMRAE says just 1% of risk managers are very happy with underwriters
French risk managers are not happy with the support they receive from the insurance market to deal with climate risks, according to a report from France’s risk management association AMRAE, although the survey results shiw some improvement from last year.
The annual Barometer about Engagement for the Climate drafted by AMRAE and AXA Climate also finds that risk managers are increasingly aware of the importance of climate risks but at the same admit they have little knowledge about climate risks in their supply chains.
“Improvements in awareness have been made in the day-to-day of risk managers,” said Antoine Denoix, chairman of AXA Climate, during a press conference in Paris. “The next stage of maturity is to develop the capacity to execute [strategies against climate change risks].”
When it comes to implementation, however, risk managers believe that insurers should play a more active role.
The survey finds 10% of French risk managers are “not happy at all” with the support that their insurers provide to mitigate climate risks. A further 41% say that their level of satisfaction is very low indeed, while 35% had no opinion.
Only 17% of respondents are mildly positive towards insurers, while just 1% say that they are very happy with the work of underwriters in this area. However, the authors of the study note that satisfaction levels are still 6% higher than in the previous survey, published last year.
Speaking in Paris, AMRAE board member Michel Josset said one of the reasons behind the lack of satisfaction is uncertainty around the insurability of climate risks.
“When we want to renew our property programmes, insurers today are unable to provide an image of what will be possible to transfer in five years’ time,” he said. “We need the insurance market, which has the technical capability to do so, to be fully transparent about the scope of the covers.”
More than half of 131 risk managers surveyed say that insurers cite climate risks to demand higher deductibles or reduce limits, and 42% said that they are used to justify premium increases.
Only 30% said that insurers help their companies implement preventive measures. Once again, however, the numbers reflect an improvement in the perception of insurance buyers, compared to last year.
The ongoing hard market and the increase in frequency of climate events are driving concerns among risk managers about their ability to purchase insurance in the future.
Seven out of ten respondents say they fear that certain regions will become uninsurable at some point, in particular California, Australia, Florida and some parts of China.
Josset said some risk managers are also unhappy about underwriters who do not differentiate between buyers that mitigate their climate risk exposures and those that do nothing.
“Many companies are engaging themselves with decarbonisation and the protection of their sites, but the insurance market is not rewarding those efforts,” he said. “It is necessary that we know the share of the price that is linked to climate risks, and that it is segregated from fire risks.”
Fifty-four percent of the survey express concern about the ability of companies to purchase cover to protect new activities linked to the fight against climate change. Josset said these include innovative construction materials and new energy sources such as green hydrogen.
“The transformation of our businesses creates new risks,” he said. “But as there are no loss histories for those technologies, insurers find themselves in a difficult position. A technical dialogue with insurance buyers would help to solve this problem.”
Josset added that technologies that help companies fight climate change will not prosper if they cannot be insured.
At the same time, insurers can equally claim that buyers are not rewarding their green commitments either. Only 17% of risk managers interviewed say that they already take into account non-financial criteria when they are selecting underwriters. Another 36% say that they are not doing it right now, but may in the future.
On the positive side, the survey finds that a growing number of French risk managers are heavily involved with the sustainability efforts of their companies – 35% against 18% in 2022, and that half of those interviewed believe that fighting climate change will create opportunities to reduce energy costs at their companies. A growing number are looking at alternative transfer solutions, in particular captives and parametric insurance, to finance their climate change exposures, the survey finds.
But ensuring the effort trickles down supply chains remains a challenge. Some 44% of respondents say they have a poor idea of what climate change risks are facing their tier 1 suppliers, and the number increases to 53% for tier 2 providers. Further, 25% of risk managers say they do not know the exposures of tier 1 suppliers, which increases to 38% for tier 2 suppliers.
