BY MARK E. RUQUET
While the dispute rages over the reality of global warming and its effect on climate change, insurers have not been sitting on the sidelines waiting for definitive conclusions. Instead, like good risk managers, they are preparing for the worst-case scenario, with a number of major underwriters taking a leadership role by promoting dialogue and supporting research, while at the same time providing new types of coverage and services to limit the potential damage.
As insurers, they have used their underwriting expertise to both generate new insurance policies and adapt existing ones for this evolving market, as well as promote loss control by funding development of environmentally-friendly technologies.
The following is a snapshot of what five top insurers are doing to provide coverage and help manage the risk of climate change.
SWISS RE
The Zurich, Switzerland-based Swiss Re is regarded as one of the most active insurers when it comes to global warming and the impact of climate change.
Mark Way, director of sustainable development for the Americas—part of Swiss Re’s Sustainability and Emerging Risk Management unit—said the company traces its first mention of the subject back to 1989 in company publications, taking a more active stance through the mid-90s.
The effort is a core function today, as Swiss Re has expanded its role considerably.
For example, the carrier was actively involved in the United Nation’s Intergovernmental Panel on Climate Change report, which assessed scientific research on the controversial issue. The report determined that man-made forces are primarily responsible for global warming, which is considered the primary cause for recent climate changes.
The company has developed what Mr. Way describes as a four-pillar strategy for dealing with the causes and effects of climate change, while also facilitating solutions.
• Understand the risk, as well as what needs to done about it.
• Promote dialogue and understanding about the subject, both within the insurance industry and among the general public, with the aim of creating a political mandate to develop and implement solutions.
• Develop insurance products that deal with the more severe realities of climate change.
• Lead by example, by working to reduce Swiss Re’s own “carbon footprint” as well as that of its employees. The carrier made a commitment in 2003 to become carbon-neutral by 2013.
On the product side, Swiss Re has developed insurance-linked securitizations, taking environmental risk to the capital markets through the development of catastrophe bonds to increase capacity. It also developed weather insurance programs to deal with the diverse effect of climate patterns on clients and their businesses.