Kevin O’Donnell, the President and Chief Executive Officer (CEO) of Bermudian reinsurer RenaissanceRe (RenRe), has said that today, observable change in the world’s climate is taking place.
“There’s a measurable change that is going on, there is a measurable difference in today’s climate compared to previous climate,” said O’Donnell, addressing an audience at the 2019 ILS Bermuda Convergence conference.
At this year’s ILS Convergence conference held in Hamilton, Bermuda, the changing climate and its impact on the risk transfer industry has been a hot topic.
For insurers, reinsurers, and insurance-linked securities (ILS) participants, much of the discussion around climate change suggests that it’s going to take quite a long time to determine whether it is really having an impact.
While the impacts of climate change are extremely difficult to predict, especially when it comes to the possibility for more severe and frequent natural catastrophe events, O’Donnell explained that at RenRe, scientists have predicted some ramifications of the changing climate.
“We believe that winter storms will be at higher latitudes and will be more intense, we believe that inland flooding will rise, the frequency and severity of inland flooding. Rising sea levels, the biggest impact of that is really in conjunction with hurricane, that has a knock on effect on how capital is consumed in this business, so we spend a lot of time understanding storm surge.
“We think the drought and wildfire connection is something that is observable. If you go back and look at what happened in 2017, we’ve had bad fires in California in both 2018 and 2017, our scientist believe it is a blueprint for what was predicted. If you look at the series of events between a wet winter, hot summer, and then ultimately the fires coming in in the fall, and that is what has been predicted for the change that is likely from climate change.
“And, we’ve done a lot of work on convective storm to understand what the climate change is, but honestly we can’t find conclusive data to have a realistic predication as to how that is going to change,” said O’Donnell.
The RenRe President and CEO emphasised the fact that much of the industry commentary around climate change focuses on the ability to determine if it is actually having an impact.
However, according to RenRe’s scientists, if you look at just 2017’s Hurricane Harvey, almost 20% – 40% of it is something that can explicitly be explained by climate change, said O’Donnell.
Ultimately, O’Donnell explained that climate change is moving away from something that is theoretically going to change the way we think about risk, to something that is observably happening and changing the risk landscape.
Only time will tell exactly what the impacts of climate change are on the natural catastrophe space, but it’s clear that RenRe feels change has already started to happen and that it’s likely to persist and alter many aspects of the risk environment.
He also touched on the protection gap and said that the industry hasn’t made progress in closing the gap, stressing that in actual fact, the gap is rising.
“So, we are looking at a world that we are doing a good job of identifying and providing coverages for the best risks, we’re looking at a world where it is becoming more likely that we are going to have severe events, and we’re not keeping pace with that change by continuing to provide capacity.
“As bad as a disaster is for climate and for society, it does create opportunities for us to bring more capital to ease the pain of the changing world,” he said.