Airmic’s latest survey has revealed that most risk professionals still do not prioritise climate risk. Even those that do are only mainly preoccupied with managing the short-term impacts such as flooding and tropical cyclones rather than the long-term consequences of climate change.
Risk management and insurance association Airmic has conducted a survey of its members on climate risk and parametric insurance cover. It found that climate risk was still not getting the priority it needed, with a majority of risk professionals ranking climate risk outside their top five priorities and fewer than 5% naming it as a top priority.
Respondents were also most concerned with the short-term effects of climate change rather than its deleterious long-term effects. Asked to rank the importance of managing short-term impacts of severe weather events against climate risk regulatory reporting requirements – such as the TCFD – and adapting to long-term climate change, a majority of risk professionals placed short-term management at the top spot and long-term resilience-building in last place.
“In this perfect storm of risks we find ourselves in metaphorically, it is understandable why risk professionals have found that they need to focus on more immediate risks such as flooding and tropical cyclones,” said Hoe-Yeong Loke, Airmic’s head of research. “However, the future costs of inaction on long-term climate risk will compound and the consequences of that will be irreversible.”
More than 90% of respondents viewed flooding as the biggest natural peril risk.
Three in four (76%) risk professionals admitted they did not think that traditional property damage and business interruption policies sufficiently covered natural perils, largely because of the restricted or excluded coverage of the policies.
Nearly two-thirds said they had considered but not purchased parametric insurance cover, while another 31% said they had never considered parametric cover as an option. Only 4% of respondents had bought parametric insurance products.
Hoe-Yeong clarified that parametric insurance policies were not necessarily weather-related or triggered by severe weather events. “They could relate to cyber, reputation, or even industrial strike action,” he said. “Nevertheless, an initial high level of commitment by organisations is required to understand and develop parametric solutions, and they then need to be able to provide reliable, independent data that correlates the business model to the risk. Brokers and insurers can help towards this end to broaden the reach and use of parametric products.”
