Climate risks to reduce profits for insurers?

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Ali Smedley

Climate Risk is InsTech’s monthly newsletter dedicated to climate-related insurance news - you can sign up for free here.

Bank of England: climate risks could reduce profits by 10-15%

The Bank of England published the findings of its second Climate Biennial Exploratory Scenario (CBES) earlier this month. The stress testing exercise was designed to help understand a subset of larger insurers and banks’ resilience to climate-related risks across the three pillars of physical, transition and liability risk.

Sam Woods, CEO of the Prudential Regulation Authority (PRA), noted that one of the key findings was that “climate risks will become a persistent drag on banks’ and insurers’ profitability - particularly if they don’t manage them effectively”. Whilst the impact is different across various scenarios and companies, average loss rates were found to be 10-15%.

The Bank of England report highlights that measuring and managing climate risk effectively is important for insurers to limit the impact of climate change on their profitability. This issue of Climate Risk covers news from companies that are helping insurers to better manage their climate risks, including Zesty.ai and JBA.

Parametric Insurance in 2022: what do industry experts think?

InsTech’s next report, Parametric Insurance in 2022: the 150+ companies to watch, will be released on 14th June. It is free to download for corporate members - everyone else can apply now for a 50% pre-release discount code. Ahead of its publication, Henry Gale from InsTech spoke to Capital Law’s Rachel Hillier, Swiss Re’s Martin Hotz, Lockton’s Diego Monsalve and Mastercard’s Ruth Polyblank to get their views on the changes impacting parametric insurance.

Neil Eckert: A career as a pioneer in insurance and climate change - Podcast 191

Neil Eckert, longstanding insurance industry and climate entrepreneur and most recently Founder and Chairman at IncubEx, joined Robin to discuss the origins of IncubEx as an iteration of a carbon trading platform. He talks about how to recognise and respond to new opportunities in the climate space and the role of carbon credits for insurers.

Making climate risk insurable - Podcast 190

Zesty.ai uses aerial imagery and artificial intelligence to assess the potential impacts of climate-related events on individual properties. Kumar Dhuvur, Co-founder and Head of Product, joined Matthew to discuss how the company helps insurers to understand climate risks and how personal experiences of wildfires in California led to the creation of Zesty.ai’s wildfire risk insights.

In the news…

JBA: 1 in 4 UK properties at risk of flooding

JBA has released its latest white paper exploring flood risk using its new UK Flood Model. It found that 1 in 4 UK properties were at risk of flooding, equating to 11 million homes. JBA predicts that due to the impact of climate change, these figures are likely to increase over time.

Arturo partners with ICEYE for flood data

ICEYE’s high-resolution flood depth, extent and duration data will combine with Arturo’s property characteristics data to give insurers the ability to estimate and triage flood damages following a flood event. ICEYE also recently partnered with US-based Neptune Flood Insurance. These two companies plan to explore triggers for parametric insurance products offered through Neptune’s Jumpstart brand.

Chaucer: Offshore energy and shipping sectors to be affected by climate change

Chaucer’s latest white paper explores the impact of ocean-based climate change trends. It found that offshore energy facilities may not be able to withstand increasing environmental challenges. As well as this, the shipping industry is facing more threats from climate change than previously anticipated, including more severe storms, sea level rises and coastal erosion. You can download the report for free here.

CAPE Analytics launches platform for US real estate market

The new CAPE AIRE platform combines computer vision, aerial imagery and additional data sources to extract information about property conditions and the surroundings. Insights from the platform are available via auto-generated reports or API.

Skyline Partners appoints David Marock to its board

Following the company’s recent deal with Howden and Munich Re, Skyline Partners has appointed David Marock to its board. Marock, ex Group CEO of Charles Taylor and current Chairman of Previsico, is tasked with accelerating the company’s global expansion.

UK SMEs to be offered Previsico flood alerts

Property insurance policies from Acies SME UK MGA are to include SMS text and email flood alerts from Previsico, giving policyholders time to initiate flood resilience measures. The alerts include information on the potential location, time and depth of a flooding event. For more on Previsico’s solutions, read our interview with Co-founder and COO, Dr Avi Baruch.

Praedicat partners with VelocityEHS on ESG ‘green chemistry’ product

Liability modeller Praedicat has partnered with VelocityEHS, a provider of cloud-based environmental, health and safety (EHS) and ESG software, to launch a ‘green chemistry’ offering. The product uses Praedicat’s technology to scan scientific journals in real-time to assess and update the risk profile of chemicals based on their potential to cause harm.

Weather Logistics launches flood risk product

A new product that helps organisations forecast floods and calculate their risk exposure has been launched by Weather Logistics. The company’s software produces climate model simulations for the next three months and provides information about local hazards such as heatwaves and floods.