March 25, 2010 by Terri Goveia
Climate change should be part of insurers’ corporate strategies and their larger leadership efforts, according to the head of the Institute for Catastrophic Loss Reduction.
Industry members have specific skills that make them natural leaders on climate change, Paul Kovacs told the International Cooperative and Mutual Insurance Federation 2009 Biennial Conference in Toronto. With rising global population and dangerous levels of greenhouse gas emission challenging the planet and policyholders, Kovacs laid out a three-point plan for industry members during his October 1 speech, urging them to adopt a strategy to reduce their carbon footprint and ensure that their policyholders had access to affordable property coverage. The third element: finding ways to offer “micro-insurance” against climate risk to global markets currently lacking such protection.
Companies could do more on the first element of the plan by recycling, reducing paper and using energy-efficient lighting, heating and cooling, and setting goals on their use, he suggested. They should also adopt sustainability practices that extend to their business and investment strategies as well as governance, he said.
But insurers’ risk management skills are a crucial tool going forward—“The skills present in the insurance industry are ideal for helping society cope with the increasing frequency and severity of extreme events,” Kovacs said, noting that insurers should further develop their knowledge of weather trends to price and assume new risks, as well as those related to green products like wind turbines and zero-emission vehicles.
Emerging climate risks also offer insurers an opportunity to teach policyholders about loss control and prevention, he said.
And it also offers them a chance to bring insurance to developing countries that are often most affected by climate change-related disasters. “The early micro-credit and micro-insurance experience demonstrates that local cooperatives and mutual societies are often essential for the initiatives to succeed,” he said.
Kovacs also addressed disasters closing to home, referencing the recent August 2009 tornadoes in the Toronto region, and the work the ICLR has done on wind research and building resilience. Over the past 20 years, more than 70% of catastrophic damage claims paid out by North American insurers stemmed from severe wind events, he said.
He urged the attendees to work with the ICMIF to promote sustainability in their own actions, noting that “climate change represents a remarkable opportunity for insurers to serve.”
This story was originally published by Canadian Insurance Top Broker.