New risk management and transfer plans emerge from Paris climate summit: extra Lloyd’s capital pledged

On the first day of the event this week, the United Nations (UN) announced an initiative to reduce the impact of climate change for 634 million most-at-risk people. At the same time governments pledged funding for catastrophe risk transfer arrangements, while insurers announced new capacity for emerging market risks. According to the UN, three out of four humanitarian disasters are now climate-related, while resultant economic losses have increased by more than half during the past decade. Over the last 20 years, 90% of major disasters were caused by 6,457 floods, storms, heatwaves, droughts or other weather-related events. The COP21 talks will see 195 countries seek an agreement to reduce carbon emissions and limit global warming. The UN Anticipate, Absorb, Reshape (A2R) initiative, announced by UN Secretary-General Ban Ki-moon on Monday, aims to build resilience of emerging markets to natural disasters. It will harness disaster risk funding and expertise to anticipate hazards, absorb shocks and reshape development to reduce climate risks.hide"The UN Climate Resilience Initiative signals a new era in how the United Nations and its agencies think about our global future," said Judith Rodin, President of The Rockefeller Foundation, which has invested more than a half-billion US dollars to build resilience globally over the past decade. "Crisis is the new normal, and our world demands that we seek solutions that solve multiple problems at once, for the greatest number of people, while strengthening the fabric of their communities, economies and lives," she said. The insurance industry welcomed the A2R framework. Attending the talks in Paris, Mike McGavick, XL Catlin CEO and Chairman of The Geneva Association, said that the industry would support the UN's climate resilience and disaster risk reduction initiative. Mr McGavick told world leaders in Paris: "Today, far too few of the world's people benefit from the resilience offered by risk sharing and transfer schemes." Risk mitigation and transfer, including insurance, are a key component of the A2R plan. Working alongside UN partners such as Africa Risk Capacity, the initiative aims to provide more than 30 countries with $2bn in coverage against drought, flood and cyclones. The UN is already collaborating with the insurance industry through UNEP's Principles for Sustainable Insurance, which sees some 100 organisations working with insurance regulators to address climate and sustainability risks. The US said that it will contribute $30m to catastrophe risk insurance initiatives in the Pacific, Central America and Africa. The money will be used to support the Pacific Catastrophic Risk Assessment and Financing Initiative, the expansion of the Caribbean Catastrophic Risk Insurance Facility to cover Central American countries and help finance the African Risk Capacity programme. The pledge follows the G7 meeting in the summer, at which leaders called for an additional 400 million people to be given access to insurance protection by 2020. Insurers have also stepped up their commitment to provide funding for climate change risk transfer solutions. Eight Lloyd's syndicates announced this week that they will now work with governments, municipalities and non-governmental organisations on solutions to address natural catastrophe risks in emerging and developing economies. Amlin, Beazley, Hiscox, Mitsui Sumitomo Insurance Group, Nephila, RenaissanceRe Syndicate Management, Tokio Marine Kiln and XL Catlin have collectively committed capacity of $400m. Mr McGavick also announced the creation of a new forum for insurers and policy makers called the Insurance Development Forum. Co-chaired by XL Catlin's executive deputy chairman Stephen Catlin, the forum brings the insurance industry together with the likes of the United Nations Development Pprogramme, the World Bank and governments to reduce the impact of natural disasters and climate change in emerging markets and help accelerate A2R. The A2R plan also includes initiatives to build better physical and natural infrastructure. The UN's Resilience Pathways project helps countries integrate resilience planning across multiple sectors and infrastructure. It will be progressively implemented across 30 countries by 2020. The UN sees an important role for the private sector in building resilience. For example, the Global Adaptation and Resilience Investment Working Group is looking to mobilise private sector investment in climate adaptation and resilience. According to the Institute and Faculty of Actuaries (IFA), risk management needs to be a central aspect of climate policy to avoid extreme global temperature rises and reduce uncertainty. "The risks associated with climate change are wide-ranging and could have major economic, political, social and financial impacts," it said. The IFA also said that policymakers and financial institutions need to consider the time horizons on which they are basing decisions and investments, and how their choices may affect people now and in the future. "Governments and businesses need to move away from short-term thinking and make sure policy and investment decisions take account of future generations," said Nico Aspinall, Chair of the IFA's Resource and Environment Board. "Our report concludes that continuous assessment and dynamic management as part of a proper risk management approach to climate change should be adopted as central aspects of climate policy. This will help ensure risks are identified in good time to properly plan for any disruption and economic and social costs in the future," he said.

New risk management and transfer plans emerge from Paris climate summit: extra Lloyd’s capital pledged

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