Dialogue between the (re)insurance industry and scientific community around climate has become crucial as companies ramp up efforts to protect against perils and demand increased scrutiny from their insurers, a group of scientists and (re)insurance individuals have agreed.
Members of our “Science of Storms” panel, hosted by Rowan Douglas, Head of Climate and Resilience Hub at Willis Towers Watson, agreed unanimously that the interaction between the scientific community and (re)insurance industry has become more relevant than ever.
“It’s a dialogue backwards and forwards between modellers – we use models to encapsulate our beliefs and our ideas. I think having the challenges from the insurance sector, asking really good questions about the science, keeps us on our toes,” said David Stephenson, founder and director of the Exeter Climate Systems research centre.
This scrutiny imposed by risk managers who service the (re)insurance industry has been catalysed by an increasing demand from clients, not only around the climate-related products on offer, but also on what the output of the models is taking into account.
This has in turn led to further efforts between the (re)insurance industry and the scientific community to acquire a deeper understanding of weather modelling capabilities.
“The robustness with which companies use them [climate models] and the frameworks around their use has really increased and professionalised, and I think the challenge that we all have to work through is when we get some great new research, what level from a business perspective of confidence do we go to in order to leverage those results,” said Michael Palmer, head of analytics and research at Hiscox Re & ILS.
At the same time, it is crucial for the (re)insurance industry to take up the role of educating its clients on risks associated with ESG, including climate-related perils, to ensure losses are minimised. Additionally, clients also are increasingly required to disclose climate-related regulatory requirements, noted Bev Adams, consulting director and head of climate and catastrophe resilience at Marsh Advisory.
“My journey throughout my career has been – how do I make sure that all the businesses that I work with have enough knowledge to act [in the prevention of climate-related events]?” Adams said, adding the tools to do so are “within our reach” and that it is “our job to make it easy for the people to understand and act on it”.
The dialogue between the scientific community and (re)insurance industry is challenged by the speed with which the former is responding to the research being published, noted Adam Scaife, professor at Exeter University and head of monthly to decadal prediction at the Met Office.
“The challenge for the insurance industry is about responsiveness and about whether or not it can really grab hold of the information that’s coming out of our seasonal, decadal predictions. Can it respond fast enough to really take advantage of that? If you think about climate change and the general trend towards more extremes, the first warning we’re going to get is from things like the seasonal or decadal forecasts,” Scaife said.
Rowan Douglas, Head - Climate and Resilience Hub at WTW
David Stephenson, Founder and Director at the Exeter Climate Systems Research Centre
Michael Palmer, Head of Analytics and Research, HiscoxRe & ILS
Bev Adams, Consulting Director and Head of Climate and Catastrophe Resilience at Marsh Advisory
Adam Scaife, Professor at Exeter University, Head of Monthly to Decadal Prediction at the Met Office