The industry’s ability to understand the impact of climate change is a work in progress according to one leading broker.
Speaking in a panel discussion during Standard & Poor’s Global Reinsurance Conference, Massimo Reina, CEO Continental Europe and MENA, at Guy Carpenter said the firm has been working with its clients to enable them to understand the threat climate change poses to their books of business.
“Climate change and its effect is an issue,” he said. “The frequency of losses is felt by the primary markets even before reinsurance is put in the table.
“Retentions are already at a high level and these losses are hitting the primary retentions as well. Clients are therefore looking at their underwriting portfolios and seeking to adjust their approaches. The frequency has changed and it is in some ways a game of catch up for the models on the major natural catastrophe risks.”
Mr Reina added: “One the keys issues currently is the secondary perils which tend not to be so well modelled but are becoming more prevalent and costly.”
While the year today had not seen above average natural catastrophe losses the levels of secondary perils have been rising significantly, highlighted by the flooding in China and the record levels of wildfires, Mr Reina explained.
These losses and the impact if climate change will have an effect he warned.
“We expect some tough negotiations with the reinsurance markets,” he explained. “They expect clients to understand their exposures and as such we are working with our clients to ensure they do so.
“In terms of climate change this includs the complex paperwork around climate risks which is produced. It is a work in progress, when it comes to climate change and will continue to be so for some years to come.”
The panel was asked how the COVID pandemic had impacted them and Alison Martin CEO EMEA and Bank Distribution at Zurich Insurance Group said the change in the way the market had been forced to work had the potential for serious issues in the future.
“Prior to the pandemic I was in a plane every week to visit some of our 20,000 staff around the world,” she explained. “Since we have been forced to work remotely, I have seen more of my people from my home than I did when I was on a plane.
“I am incredibly lucky in that I have a family with me at my home, so I have close emotional support alongside the ability to engage with people remotely. However, there are those who are not as lucky and do not have such support.
“I do have concerns that there are a number of serious mental challenges that the new way we work has presented and it is very likely they will play out in the future.”
Swiss Re CEO Reinsurance Moses Ojeisekhoba, said the speed which the industry adapted to the new way of working which was required due to the pandemic had surprised him.
“The market was asked to change the way it works so quickly and so radically,” he explained. “We have been forced to change from physical to virtual relationships.”
However, he said that while the industry and its staff had been resilient and had coped so well there was a need for face to face interaction.
“There is still a need for continuity and when you have new members of staff the need to ensure they understand the culture of the business,” he said. “Therefore, there will always be a need for physical interaction.
“I do not recall in 20 years when I have been at home for a moth let alone eight months,” said Mr Ojeisekhoba.
Mr Reina said life would never be the same post the pandemic.
“I have never been a huge fan of working from home, but I have changed my mind in some respects,” he said. “I believe the way we work will never be the same again. What I will say is the resilience that the world has shown in the face of these challenges has been amazing but there is also a clear understanding that we need each other to operate.
“While there are tasks that can be carried out at home I believe for productivity and the creation of ideas and innovation there is no substitute for the office environment where ideas can be discussed and exchanged.”