Reinsurance News recently spoke to Joss Matthewman, Senior Director, Product Management & Strategy, RMS, about what he believes the re/insurance industry needs to do to try and combat the effects of climate change.
He highlighted how this topic is particularly important, because, as physical risks change as the climate changes, the industry needs to be making sure that the coverage gap does not grow as the economic exposure increases.
“I think the role there for both reinsurers and insurers is how can they plan better? What we are currently seeing is a real opportunity for reinsurers in particular to start looking at the near term views, project how the overall risk may change, and to plan for this,” he said.
“We should be able to identify emerging hotspots, and develop new insurance products and new diversification strategies. This way we can continue to keep higher risk communities in coverage, and potentially even improve the risk by feeding back into resilience efforts on the ground by leveraging the relationship between primaries and their policyholders.”
Moving forward, Matthewman also discussed how well he believes that reinsurers are dealing with climate change risk management.
“With RMS we have done our best to support the market, especially with our climate change models, but I think the industry as a whole needs to focus on how to improve its decision making.
“We have seen a considerable amount of activity which is regulatory driven to begin with. But the companies that are really outperforming are using those near term views of climate risk, and using that to adapt their decision making today into a sustainable business plan.
“There are three steps that the industry follows within climate change risk management. The first one starts with the science, then the second focuses on building the tools, and the third is to deploy the tools, and the last step is where I believe we still have the largest gap between where we need to be, and where we are today.”
Further, given how costly US severe convective storms (SCS) and global flooding has become over the past few years, Matthewman highlighted how impactful RMS’ catastrophe models are towards capturing secondary perils.
“Severe convective storm is a peril across the US that we have had a model for, for a number of years. There is also now a much more emerging market in US flood with the deregulation of the market and the changes to the NFIP. As a result, we have released a US Flood catastrophe risk model into the market to help support that growing market use case.”
Adding: “When we look at secondary perils, we usually refer to them as being secondary both in terms of the available tools for quantifying their risk, but also how they are monitored within risk management frameworks, compared with primary perils.
“I believe RMS’ model suite has helped to close this gap in approach between secondary and primary perils. “