The role of the re/insurance industry in building global climate resistance is currently “significantly untapped,” according to Ekhosuehi Iyahen, Secretary General of the Insurance Development Forum (IDF).
Speaking during a recent lecture in the Old Library at Lloyd’s of London, Iyahen discussed how the industry can help to build climate resilience and close the global protection gap.
The talk primarily focused on the utilisation of insurance via public-private partnerships such as the IDF, which was launched in 2016 by leaders of the United Nations, the World Banks, and the re/insurance industry.
“We stand firmly in the position that there is a lot that the industry can bring to this process in terms of risk analysis and understanding, product design, engagement and experience with regulators, and also capital,” Iyahen told the audience at Lloyd’s.
“And this is important,” she added. “With developing countries, what we should be thinking about is not just providing an injection of money when these events occur, but how can we develop systems that actually help them to be more resilient.”
It is particularly critical for developing governments to mitigate their liabilities in this way, Iyahen noted, because a lot of the money that goes into a disaster response budget could otherwise have been allocated towards health, education, and other development activities.
However, the IDF believes the re/insurance market can leverage the wealth of information at its disposal to go beyond the limited scope of transactions and payouts.
“We are also seeing an evolving narrative in some of these countries where there is a recognition that the system doesn’t work,” Iyahen explained. “The reliance on ad hoc interventions here and there doesn’t work.”
“So there is a desire to have a conversation around how can we develop better systems? What does that look like? What do I need to be thinking about in terms of developing these better systems? And this is a conversation that insurers have the skills and technical capacities to actually engage with.”
Re/insurers may therefore have a much larger part to play in supporting these conversations and facilitating new systems to build climate resilience, Iyahen said.
“I try to avoid painting a picture as though solutions are easy or singular in nature, because they are not,” she continued. “But I do think there is a huge role that the insurance industry can have that is currently significantly untapped in many of the jurisdictions that we are looking at. I think we can make a lot of progress there.”
The IDF believes this kind of engagement will be beneficial to countries looking to build climate resilience and mitigate catastrophe losses, but it also views it as significant business opportunity for the re/insurance industry.
“If you want to grow, if you want to remain relevant, you also have to be willing to explore new frontiers,” Iyahen argued, pointing to the vast protection gap in may of the areas the IDF is focused.
“So we don’t approach this as a charity exercise and I don’t think it should be relegated to corporate social responsibility,” she concluded. “It’s a business opportunity but it will require significant investment because these are markets where the role of insurance is new to them.”
