EDITOR’S LETTER

Be the difference in an uncertain future of risk

“How the sector might help the world manage the financial implications of future pandemics is a massive question.”

Maybe the worldwide media spotlight on the COP26 conference in recent weeks has sharpened the industry’s focus on climate change—but it has certainly been high on the agenda at SIRC this week. A number of well-thought-out presentations focused on the issue, and senior executives we have interviewed around the conference have wanted to discuss it too.

Much of the dialogue has focused on the physical effects of climate change and the challenges around modelling the impact of that. This is an issue amplified in the Asia-Pacific region where, even without the challenge of future-projecting the impact of climate change, accurate historical data is harder to come by as well.

Flood is arguably the most challenging aspect of this—and some of the projections are startling. As Peter Sousounis, vice president and director of climate change research at modeller AIR Worldwide, pointed out at the conference yesterday, if all the ice on this planet melted, it would contribute a sea level rise of 60 metres. Sea levels have risen only gradually to date—about 20 to 24cm since the late 1800s, but the pace is accelerating.

This causes obvious problems for insurers in the form of claims. But there are less obvious challenges on the horizon that the industry is only now starting to consider in detail—and on a global scale.

One of these is climate change-related litigation. Lawsuits have been filed in the US as long as a decade ago, but cases are also now emerging in Australia, the UK and various EU member states. In many instances, governments are the defendants, but corporates have also been drawn into the net.

It is likely that insurers will get increasingly pulled into this issue. Even if that seems unlikely at present, COVID-19’s business interruption claims illustrated very well how, in desperate times, the insurance industry can become a target for claims—and the courts do not always protect the sanctity of insurance contracts in the way that should be expected. At some point, courts will determine to what extent commercial liability policies might respond to such claims.

These are fundamental questions for the industry—and ones that could have a big impact on its future trajectory.

Positive thinking

Perhaps it is important to be positive about such matters, and take the view that the industry can make a meaningful and important difference to the way the world handles such risks. That is certainly what Swiss Re’s Moses Ojeisekhoba did in a fireside chat at the event yesterday, when he spoke with pride about the quality of his company’s people whose job it is to figure such things out. He believes the industry can make a difference.

There could be even more complex risks than climate change ahead for the industry to grapple with. Just how the sector might help the world manage the financial implications of future pandemics is a massive question that is also being debated during this conference. While clear, the risk is far too big for the industry to tackle alone, and there is consensus that the industry has a role to play in helping governments consider potential structures that might do this.

Another good panel discussion on this topic noted the “unknown unknowns” that must surely exist when it comes to pandemic risk. Perhaps as is the case with climate change, we are starting to shine some light on the biggest risks—and their potential solutions. That’s why this industry is so important—but it needs to be positive and proactive and believe it can be the difference when the world needs it most.

Wyn Jenkins is the managing editor of Intelligent Insurer

Image: shutterstock.com / Matyas Rehak