Taking on the stark challenges of climate change

The last two years have given us all an unambiguous reminder that nothing can ever be taken for granted. As the pandemic left its trail of economic devastation, the notion that anything can be considered truly stable has been starkly challenged.

For the re/insurance industry, 2021 has raised a number of challenges relating not only to the pandemic, but also to our relationship with the natural world. A string of natural catastrophes ranging from flooding in Europe to wildfires in California and several strong hurricanes have provided a timely reminder of more familiar threats.

On top of that, there is the ever-growing peril of cyber attacks and outages, and their impact on businesses and the wider economy. The industry is beset by challenges which pose existential threats to individual firms and question the market’s ability to handle the risks of the future.

For chief executive officer, reinsurance at AXA XL, Charles Cooper, however, there is one issue which stands above the rest as the key topic for the market: climate change.

Many people across the globe (not just in the re/insurance industry) are concluding that shifting weather patterns are behind increasingly perilous and unpredictable weather events. As the first line of economic defence against such perils, the re/insurance world must view the climate as its absolute priority in the years ahead, Cooper says.

“The number one topic—not just for our industry, but for our planet—is climate change. It is the one topic that has been building in the property and casualty (P&C) re/insurance industry and has been dominating the agenda of every company worldwide with environmental, social and corporate governance (ESG) factors,” he said.

“It has been truly amazing. In the last two years, every mainstream company—not just in Europe, but also in the US—is talking about climate change and how CEOs are positioning their companies for the impact of that change,” he added.

While the challenge is one that the re/insurance industry is perhaps uniquely positioned to tackle, given its long-standing knowledge and expertise in handling natural catastrophes and modelling the fallout from such events, Cooper said that it needed to better explain its value in dealing with climate change.

Given that the market can provide a means to offset some of the financial and other issues that are likely to arise from shifting climate patterns, he stressed that the industry needs to plant a flag and make a more substantive contribution to the discussion.

“As an industry, it is a topic we have been talking about for years. We see it every day, because part of what we sell is protection against some elements related to climate.

“But now it goes far beyond our industry. I imagine that every CEO of every company on the planet is now thinking about how to adapt their business for climate change. As reinsurers, we should be able to raise our profile in the context of that discussion.

“Because we have been living with it for quite some time and thinking about it from a different standpoint, we need to become more resilient to the impact of climate change—although it's still going to be 20 or 30 years before the changes we make today are felt. “We need to make the world more resilient, and that’s where re/insurance can play a bigger role,” he said.

More diversity

In addition to focusing on the impact that climate change is having on the industry, Cooper is homing in on the issue of diversity and inclusion (D&I) as a key driver of change for companies across the board.

D&I has become one of the more important issues that the industry is addressing, and while progress is being made, Cooper believes the market needs to work harder to improve access to underrepresented constituencies and to make itself more attractive to a wider range of talent.

“D&I continues to be an extremely important topic, although it is very difficult for us, as an industry, to make a lot of progress. That said, we are making some headway, which is good,” he explained.

“We must go faster. We need to expand our talent base, and we need to bring more young people into the business. We have to sell the idea that this is an interesting and important business in which to be involved.

“We haven’t done enough in that regard. We need to continue to push, not only diversifying but also broadening our talent base, and getting more bright young people interested in this business. It’s something I'm passionate about,” he concluded.

Charles Cooper is chief executive officer, reinsurance of AXA XL. He can be contacted at: charles.cooper@axaxl.com