Insurance solutions to help de-risk climate change impacts

Insurers can help corporates to de-risk impacts from climate change in a number of different ways, according to Swiss Re Corporate Solutions: by analysing damages and claim patterns to anticipate trends, formulating underwriting solutions for emerging hazards, and encouraging behavioural changes and ensuring insurance products can be offered on a sustainable basis. Robert Hunziker, head property and specialty APAC, Swiss Re Corporate Solutions, told Global Risk Manager that the insurer invests in tech/data-driven innovations and solutions to narrow the protection gap and transfer climate-related exposures not covered by conventional insurance programmes. “The risk landscape is constantly evolving while secondary perils are on the rise, thus we are continually expanding our product offerings to address local exposures,” he said. He noted that insurance market capacity availability is significantly driven by macroeconomic factors, which can change abruptly, and it is vital for corporates to build resilience through a combination of risk mitigation, smart planning, and financial risk management. “Our client interactions throughout the years have taught us that corporates can greatly benefit from better analytical models to assess climate-related risks,” he said. According to Hunziker, alternative solutions are increasingly looking at alternatives to traditional risk transfer. “Given a hardening market characterised by rising insurance prices, risk managers are re-evaluating their retention strategies, and captives have proven to be an effective instrument to balance market fluctuations. This increased use of captives is translating into an increased demand for captive solutions – be it for fronting services or captive protection,” he said. He also explained that parametric insurance, an area where Swiss Re Corporate Solutions has been heavily involved, is one offering that has proven to be a very effective and complementary tool in filling the gaps of conventional insurance programmes. “For example, our parametric tropical cyclone insurance for transmission and distribution lines provides cover for an otherwise uninsurable asset class, as well as quick and hassle-free loss settlement,” he said. Hunziker pointed out that natural disasters can cause more than property losses. “They can disrupt day-to-day business operations for significant periods, and at times traditional indemnity-based insurance does not provide the breadth of financial protection required by large corporates and/or governments,” adding that the insurer offers parametric insurance covers with simple triggers and payout mechanisms to provide cover for pure financial losses as well as to speed up claim payouts. “One example is non-physical damage business interruption (NDBI) covers that can be applied across many industries for Black Swan events such as widespread travel disruption or loss of attraction for a tourism destination,” said Hunziker. “As the NDBI cover is purely a function of the triggering event and measured index, there is no requirement for actual physical damage to the affected location; the transparency in the payout mechanism cuts out the tedious process of claim quantification and claims adjustment and enables quick payouts. In addition, such a solution is customisable to different locations and perils.” ---------------------------------------------------------------------------------------------------------------- Commercial Risk and Global Risk Manager are to launch a dedicated information service covering Environmental, Social and Governance (ESG) issues, aimed primarily at large organisations in Europe. ESG Risk Review will provide insight and intelligence on sustainability risks, covering regulation, litigation and insurance market news, as well as analysis, comment, interviews and webinars. ESG Risk Review will be supported by Zurich as our headline partner and will offer free-to-access content for all risk and insurance managers and related ESG officials within corporates. It will launch on 17 May 2023. To sign up for the monthly newsletter, please visit: https://www.commercialriskonline.com/esg-launch/

Insurance solutions to help de-risk climate change impacts

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