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The devil is in the details. Climate risk and regulations require organizations with a global presence to maintain granular insights and awareness of geographic differences to effectively mitigate property risks.
As the January renewal period approaches, reducing and controlling natural catastrophe exposure top the list of most important drivers of reinsurance purchase decisions. More than the quantity of risk data, depth and breadth of analytics are critical as climate risks rise in frequency and impact.
“The first step to managing climate risk is measuring climate risk.”
New wildfire models predict record-breaking fire losses placing more weight on recent years given the rise of climate risk. Effective risk management requires a constant reevaluation of risk models, and as climate change impacts increase, risk and insurance professionals must stay ahead of the curve in accurately recognizing the risks on the horizon.
Reinsurance rates are likely to increase once again in the new year. With renewal periods on the horizon, risk and insurance professionals must develop more nuanced and proactive risk management strategies to effectively lead in 2022.
“You cannot manage your risk if you don’t know what your risk is. It’s the risks that you don’t know about that will be the problem, and you cannot do that without a data-driven and tech-enabled risk management approach.” – Barbara Porco, Fordham Business School.
With news from the 2021 UN Climate Change Conference indicating a stronger international commitment to combatting climate change, insurers should expect rising carbon prices to shift investment and risk mitigation strategies for the short- and long-term future.
For risk and insurance professionals, speed and time is everything – in responding to catastrophic events, in innovating products, and assessing risks.
Climate risk affects how portfolio can build their portfolios over the next two years, and accurately assessing environmental concerns and mitigate risks will be at an even greater premium as premiums increase. Climate risk is no longer just a long-term concern.