De-risking climate change requires ‘active adaptation’: EAIC panel
September 27 2024 by Kristina ShperlikTargeted policy measures to address structural drivers of cat losses, better data collection, including individual exposures, and modelling are needed to combat climate risks.
John Zhu, chief economist Asia Pacific Swiss Re, opening the panel “De-risking climate change and advancing sustainability: turning promises into action”, warned of the growing burden of nat cat losses that are increasing by 5-7% annually, putting pressure on economies.
In Asia, climate risk is mixed with economic factors and is more noticeable because of factors like a high concentration of property exposed to various risks like high temperature, wind and flood, the speed of urbanisation and the lack of infrastructural elements like efficient drainage systems, Zhu said.
These losses “put significant strain on both private and public sector, requiring actions like reconstruction which is becoming more expensive because of inflation.
However, building resilience against emerging risks like flood is possible, he said.
“The natural catastrophe protection gap is rising. So not only natural catastrophes are causing more and more damages, but a lot of that [damage] is simply uninsured, and many regions of the world still lack the adequate insurance protection, including many countries in emerging Asian economies,” he said.
“There are long-term structural factors like urbanisation… which act as structural long-term driver of growth and nat cat risk”.
Christopher Hui, secretary of financial services and the treasury of Hong Kong, shared that the local market is trying to achieve net-zero targets, looking at specific sectors that contribute to carbon emissions.
“We are a service economy and don’t have much manufacturing, basically the largest contributors are power generation (more than 60%) and transport,” he said.
He referred to specific measures such as discontinuing coal-based power generation and increasing the use of renewable energy in the energy mix to 10% by 2035.
So these are the specific measures in terms of using a regulatory or policy approach to require the certain segments of the economy to be carbon neutral.
He also explained that starting this week Hong Kong will be adopting a new arrangement with the stock market open during typhoons in order to make the market more resilient and ease work for foreign investors.
Lubomir Varbanov, managing director and head of public sector solutions APAC and multilateral development banks at Swiss Re, highlighted the need for active adaptation and risk management besides mitigation that the public discourse has been focused on.
“Insurers and reinsurers can take more risk on certain elements whether it’s political or supply chain disruption risks to provide more comfort to investors… specifically lowering the cost of capital, which in turn allows some of these adaptation projects which are so critically needed to go ahead,” Varbanov said.
Eric Hui, CEO of Zurich Hong Kong, pointed to the importance of having a sustainable portfolio for insurers to manage losses and affordable charges for customers.
Talking about modelling, Zurich’s Hui brought up the challenge of adapting complicated data to a model.
“In Asia, we don’t have a standard geocodes for properties or assets…and the problem is we can’t really contribute our data,” he said.
He explained that since the government has a common spatial data infrastructure agreed on, Zurich is trying to relate that into its claims data.
“People can only see and feel the rain and flooding. But do they really understand what the future looks like? If we don‘t accelerate adaptation, we‘re going to see a worsening trend of natural disasters and climate-related losses.“ Chelsea Jiang, AXA
Chelsea Jiang, chief technical and innovation officer, general insurance, Greater China at Axa Hong Kong and Macau, said that while an understanding of broader geographies to climate change has been developed, understanding of individual clients’ exposures to climate risk is very low.
“People can only see and feel the rain and flooding. But do they really understand what the future looks like? If we don‘t accelerate adaptation, we‘re going to see a worsening trend of natural disasters and climate-related losses,“ she said.
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