I am amazed when I give a speech to a large audience of continuity professionals how several will note in their evaluations that I damage my professional credibility by stating that climate change is a known risk. Wow!
Well, many including the Department of Defense consider it a substantial risk. !nsurers are well-aware of the effect climate change is having on their business. Weather-related risks are in constant flux, and markets for new specialty products are clearly emerging.
But insurers may be missing out on an opportunity to play a leading role in the national debate on climate change—and to even perhaps help shape the way the country responds to the reality of more extreme weather.
US insurers have generally been slow to follow the lead of their European counterparts in addressing how to mitigate factors likely to spur climate change and trigger more frequent and severe weather-related events. Carriers are primed to become more engaged on this issue for three reasons:
- Intensifying regulatory and rating agency scrutiny into how insurers are accounting for climate change issues
- It is better to prepare for the potential impact of climate change in case scientific warnings turn out to be well-founded
- There is growth potential for insurers that capitalize on a growing market for sustainability-related products and services
The Deloitte Center for Financial Services in a new report entitled “2015 Property and Casualty Insurance Outlook: Focusing on the Big Picture” addresses several industry trends—including regulatory challenges, capital management and what it terms “information fluency.” But it also highlights climate change as a key issue for insurers in 2015. And it suggests that, while insurers may be doing quite a bit from an actuarial perspective to better quantify changing risks, they may want to step up their game in 2015.
Sam Friedman, insurance research leader at Deloitte, likens the current situation with climate change to previous situations with building codes and auto safety. “In those cases, the insurance industry showed that it could be at the forefront of risk management by promoting stronger building codes and more stringent requirements for vehicle safety,” he says. “The question is whether insurers are ready to play the same role now when it comes to climate change.”
What are you thinking about continuity planning and climate change? Time to jump on the bandwagon?