SIRC: Expert panel urges more action on climate change in APAC during record yearNovember 2 2023 by InsuranceAsia News Staff
Melissa Hyak, a broadcast journalist, moderated an expert panel discussion on how APAC’s reinsurance sector can respond to the growing challenge of climate change in region which is causing growing underwriting losses and causing pain for both personal and business customers.
In 2023, several record US$1 billion plus loss nat cat events occurred in New Zealand, including Cyclone Gabrielle and the Auckland Anniversary floods in January and February, have been followed by huge rainfall losses in China, with Beijing seeing its highest rain total on record, and Typhoon Doksuri causing over a US$1 billion in insured losses. And Special Administrative Region Hong Kong issued its longest black rainstorm signal on record causing hundreds of millions of dollars of damage – although the tally has yet to be formally added up.
As the planet warms the atmosphere is holding more vapour meaning larger downpours and helping is helping to create potentially larger and more powerful typhoons.
Heat records have also been shattered across the region, including in Japan and China, as the world turns from three years of La Niña – which brings wetter conditions – to the drier and usually hotter El Niño weather system.
Providing an introduction to the panel, Gianfranco Lot, chief underwriting officer, P&C reinsurance, Swiss Re, said: “The reinsurance sector sees climate risk as a key threat. The APAC region is most frequently affected by nat cats, accounts for almost half of global protection gap. The industry is also set to be not responsive enough.” Lot added: “It’s important to maintain discipline to create data standards and understand that data definitions. We will be able to protect more people, businesses, the public sector and societies.”
Warmer than ever
Professor Benjamin Horton, director of the Earth Observatory of Singapore (EOS), which is based at Singapore’s Nanyang Technological University (NTU), returned to SIRC for the first time since 2018 with spome worrying observations. The EOS was founded in 2008 to better understand geohazards and climate change.
Horton said that land and, in particular, ocean temperatures, are above previous records this year and spoke about a summer 2023 marine heatwave in the Caribbean which has seen every coral bleached. Also, he talked about the wildfires in Canada, when over 6,500 fires burned the largest amount of land in the country’s history and saw smoke blow all the way to New York City causing a pollution emergency. He described humanity’s impact on the climate as “staggering”.
Horton added: “Climate scientists are increasingly worried that that climate is getting away from us. Int the last 15 years it seems we are on an exponential curve in terms of the planet warming.”
2023 has seen the return of El Niño after three years of La Niña. If El Niño keeps going, 2024 will be “off the charts” for the climate, Horton noted.
During the discussion, Winnie Tan, senior vice president for sustainability at Great Eastern Holdings, posed the following questions to the market: “Is your company doing less harm and do you have your own green path? What more good can you do? Are you helping really fragile clients to transition? What risk mitigation behaviour can you help your clients take on?”
Dr Jayanta Guin, executive vice president & chief research officer, Verisk Extreme Event Solutions, said: “We’re not big fans of using the term secondary perils as they’re causing billions of dollars of losses. We started modelling floods in 2007, hurricanes in 1987. Look at the amount of flash flooding that happened just this year”.
Guin added: “From a risk modelling point of view, we have to develop solutions from an engineering point of you, where scaling is a problem. When we build a model, we look into five to 10 years when we cannot have a single weather event that have not been looked into. This is the view of risk with or without climate adjustment – this is the direction we’re targeting but it’s not available everywhere.”
Vipul Shetty, head of energy transition, APAC, at Howden Specialty, said: “We have spent decades doing specialty, marine insurance etc. We have to absorb knowledge about climate change and pass it to actions.”
Shetty added: “It’s not a competition – as in your premium against mine – everyone can benefit.”
Dr Sibylle Steimen, managing director, advisory & services at Allianz Re, said: “We have to come up with much more models. We need to have a model-based reflection. We need the models, and to trust those models. Some perils were just not modelled.”
Steimen said: “We price for the risk in the current climate, not what it will be in 2050. The models used for pricing have to reflect today’s climate. In future, we will have to give an outlook for the climate, if they want to stay in operations for 30 years, the risk profile will change. Climate change is here to stay, and we have to act and take it into decision-making processes. Nag your clients every time you see them and make them do it.”
Meanwhile many eyes in APAC’s reinsurance market will be turning to Australia to follow what is expected to be the worst wildfire season since the Black Summer of 2019/20. States at threat include New South Wales and Queensland. And in an increasing environment of climate uncertainty around the world, there are still around eight weeks left in 2023 to cause a few surprises to the market and to possibly impact the 1.1.2024 renewals. And as we have seen in recent years, the event may not even need to happen in APAC.
As ever there is plenty of work ahead to grapple with the growing issue of climate change.
The climate change panel discussion took place in the morning on Wednesday, November 1 at the SIRC 2023 in the Marina Bay Sands. For more InsuranceAsia News (IAN) coverage of this year’s SIRC click here.