Transcript Slide 1
How insurers help people deal with climate change – the role of insurance in managing climate change risks Michael Kerner Global Chief Underwriting Officer, Head of Group Strategy Swiss Private Insurers’ Luncheon Brussels, November 5, 2008 The Insurance Mechanism and its Role in Managing Risks Key Function 1 Underwriting/ Risk Engineering 2 Claims Management Investment 3 Assess and price risks, offering customers protection against financial losses – send price signals for risky behavior Risk Pricing Agree on conditions/measures to reduce physical risks, reducing losses to society Loss Prevention Pool risks together to spread the costs and minimize individual capital commitments Risk Transfer Effectively manage loss events to provide customers with timely compensation and relief Carefully invest policyholder and shareholder funds, ensuring adequate funds to cover future claims, while providing a fair return to shareholders Objective: Offer customers appropriately priced risk management solutions, while remaining profitable and providing a fair return to shareholders 7/17/2015 2 The Need for Private/Public Partnership to Combat Climate Change Risks Provide Solutions Private Sector – Insurance Provide Solutions Public Sector – Governments Enable Solutions Combat climate change risks through: 7/17/2015 • Adaptation Reduce vulnerability - minimize impact • Mitigation Slow/eliminate climate change - migrate to low carbon economy 3 Insurance Solutions and Government Enabling Actions - Adaptation Solutions Enabling Actions Objectives 1 Risk Transfer Carefully design public disaster relief systems to avoid perverse incentives Restrict government role to a “re-insurer” of last resort Where needed, develop enabling regulation for microinsurance Effectively spread risks to reduce capital requirements Ensure viability of private insurance market – minimize politically motivated subsidies 2 Loss Prevention Develop sound land development policies and flood protection schemes (e.g., EU Floods Directive, UK Government - ABI agreed principles) Establish construction codes that focus on sustainability Minimize losses Maintain insurability of risks 3 Risk-based pricing Promote responsible and appropriate rate regulation – allow for actuarially sound premiums Encourage customers to actively participate in managing own risks Send risk-based price signals 7/17/2015 4 Insurance Solutions and Government Enabling Actions - Mitigation Solutions Underwriting New Technologies 1 2 Sustainable Investing 7/17/2015 Enabling Actions Direct research funding to low carbon technologies Objectives Reduce GHG emissions Provide tax credits or subsidies to “internalize” the carbon externality and foster deployment of new technologies Establish regimes clarifying insurability of new technologies (e.g., long-term storage liability for CCS) Establish consistent, long-term regulatory framework on carbon, allowing for the development of efficient carbon markets and prices Direct capital to lowcarbon technologies 5 7/17/2015 6