challenges and opportunities for the insurance industry in ... · 4/13/2015 · reflections:...

Challenges and Opportunities for the

Insurance Industry in Extreme Events

and Climate Risk Management

Proposal for the Development of Geneva

Association Strategic Priorities and

Implementation Plan in EE + CR

By Maryam Golnaraghi, Ph.D.

13 April 2015

Background: Latest international developments and trends:

Policy, Regulatory, Financing, Management of EE + CR

R&D in Science of EE + CR, Data and Operational Services

Reflections: Challenges and opportunities for the insurance industry

in EE + CR

Strategic positioning and planning of GA’s research and advocacy in EE +

CR

Discussion and feedback

AGENDA

2

International Framework Agreements Related to EE + CRDifferent negotiation processes, approaches, targets, focal points

and implementation mechanisms at international, regional and national levels!

Strategic engagement requires mapping and prioritization!

DRRClimate Change

Climate ServicesIV. Global

Framework for Climate Services

(GFCS) - ICBS• Operational climate

services

Sustainable Development Goals (SDGs)

II. COP- UNFCCC Agreements

• Kyoto Protocol• Bali Roadmap• Cancun agreements

Durban Outcomes• Doha Climate

Gateway• Warsaw Outcomes

Next: Paris COP 2015

I. SDGs (UN Summits)

• Post 2015 Development Agenda

• Johannesburg Implementation Plan

• Agenda 21

Next: Financing Development (Addis Ababa July 2015)

Next: UN Summit 2015

III. UN International

Strategy for DRR(UN-ISDR)

• Sendai Framework for DRR (2015-2025)

• Hyogo Framework for Action (2005-2015)

Next: Implementation (GPDRR, RPDRRs)

IPCC Reports GAR Reports

2015 Provides Unprecedented Opportunities for Strategic Positioning of

Industry’s Engagement in International DRR, Climate Change

and SDG Processes!

UNISDR—Third World Conference on DRR—Adopted Sendai Framework for

DRR 2015-2030 (March 2015, Sendai, Japan)

Third International Conference on Financing Development—(July 2015, Addis

Ababa, Ethiopia)

UN Summit on SDGs—Adoption of Post 2015 Development Goals (Sept.

2015, NYC, U.S.)

UNFCCC COP 21—COP Climate Change Framework Negotiations (Nov/Dec

2015, Paris, France)

4

Progress, Trends, Gaps in Managing EE & Climate Risks

Much to do to address underlying causes of risk!

Risk Financing and Risk TransferRisk Assessment

Hazard databases and metadata

Forecasting and projections

Loss and damage databases

Exposure and vulnerability

Statistical and forward-looking approaches

PREPAREDNESS: Early Warning Systems emergency planning

PREVENTION and MITIGATION: Sector planning (e.g. zoning, infrastructure retrofitting, building codes, agriculture diversification…)

Gov. investments, trust funds (ex ante, post disaster)

CAT Bonds, insurance and ART

Risk Reduction

Information and knowledge sharingEducation and training

Governance and Institutional Framework (Policy, Regulatory, Institutional Roles & Mandates)

(multi-sector, multi-level, multi-hazard)

3

1

54

2

6Source: WMO DRR Program

Emergence of Parametric InsuranceLong-term sustainability, institutionalization and scale

remain to be addressed!

Caribbean and Pacific: Development of Regional Catastrophe Risk

Insurance Facilities are being linked to socio economic groupings activities –

For Risk Pooling and Diversification (CCRIF with CARICOM and PCRAFI

with SOPAC)

Asia: China, India and Mongolia (e.g., agriculture and livestock risk),

Philippines (e.g., typhoons, earthquakes and early recovery)

Africa: First catastrophe insurance pool of African Risk Capacity (ARC- AU),

and Agricultural Risk in Ethiopia and Malawi (drought)

South East Europe: Earthquakes, floods and droughts

International Development Agencies backing global entities for development of parametric insurance solutions in developing nations (Agriculture and food security, health)

6

Selected International and Regional Organisations

Engaged in Insurance in relation to DRR and CRMDifferent priorities, processes, focal points, activities, coordination processes

Organisations/ FPs Policy Regulatory Financing Strategies & Standards

Implementation Risk Modelling Cost/benefit

IMF X X X X

World Bank Group (including IFC)

GIIF

X X X X Catalyst for national (Malawi) and regional risk financing (CCRIF, PCRAFI, SEE)

• UR Forum• CAPRA (Central America),

Pacific, Caribbean• GFDRR Risk Lab• With UNISDR, WHO, ILO

OECD X X X Global reportsNational case by case

Risk Governance

WEF X X X Global Risk report

Internationalassociations and private sector groupings

X X X e.g., FSB, IIS, ClimateWise, MCII

UN X X X X UNISDR, UNFCCC, WFP, ILO, IFAD, UNEP-FI

Depending on the organisation

Bi-lateral donors X X DFID X

Regional Socio-economic Groupings

X X X X e.g., EU, ASEAN, APEC, AU, SOPAC, CAICOM

Regional Development Banks

X X X X e.g., ADB

NGOs, Foundations X CARE, Gates Foundation

X





in EE + CR


CR


AGENDA

8

Pacific

Decadal

Oscillation

Northern

Atlantic

Oscillation

IPCC AssessmentsUNFCCC

negotiations

Scientific R&D on climate and its impacts are underway through

internationally coordinated research programmes (e.g., WWRP, WCRP, ICSU-

IRDR, GFCS) Globally coordinated climate research and operational networks provide the

opportunity to promote and facilitate R&D themes relevant to the industry!

Regional and national

operational services

Global Framework for

Climate Services

Source: WMO DRR Program

Climate forecasts and scenarios present opportunities for improving forward

looking CAT and climate risk analysis!

Progress with Extreme Events and Climate Risk Modelling

Coordinated network of climate centres operated by member states to

operationalize climate information services!

Global Framework for Climate Services

191 Countries

Source: WMO DRR Program

Data policies need to be addressed at the highest political level!

Open data policy: key hurdles,

Data is critical for national security

Data is commercial but highly priced

Not available at all or need to be rescued (digitized)

Not shared (institutional turfs and silos)

Hazard data: International data policies facilitated by UN

Resolution 40 “Meteorological and Related Data…” WMO 1995

Resolution 25 “Hydrological Data and Products” WMO 1999

GFCS is tackling hazard and climate data accessibility policies—since 2012

Loss and damage: UNISDR and UNFCCC are promoting data policies and standards for loss and damage data

Data quality standardization and national data platforms: more coordinated approach but takes time

Munich Re, Swiss Re, CRED, La Red, EC-JRC, ICSU/IRDR, UNISDR, UNDP, WMO, UNFCCC Loss and damage,

ISO

13





in EE + CR


CR


AGENDA

14

Multi-sector & multi-stakeholder issue

• Sectoral silos, cultural differences and receptivity

• Challenges with multi-sectoral cooperation and alignment (public, private, science, etc.)

• Scaling up and institutionalization of various initiatives and activities (e.g., IGOs, NGOs, public, private, IFIs)

R&D: forward-looking risk-based decision-making

• Need for costs/benefits of risk reduction and transfer

• Data policies and availabilities: (hazard, assets and exposures)

• Forward -looking hazard/Risk modelling R&D – Role of science

• Development approaches• Technical capacities and access to latest

research and technical developments

Challenges for the Insurance Industry Related to Extreme Events

and Climate Risk

Changing patterns of Extreme Events and Climate Risk

• Economic risks of EE & CR on the rise!

• Past not a trustworthy indicator of future!

• Basic Hazard/Asset/Exposure information!

• EE + CR impacts different societies differently (development challenge!).

• Need for forward looking quantification of risks

• Quantification of risk and correlations of risks globally not well understood

Gaps in insurance demand

• High EE + CR risk levels in many countries

• basic hazard/risk information not readily accessible!

• Governments remain reactive, (inadequate policies, legislation and investments in prevention)

• Lack of understanding of insurance

• Lack of incentives (subsidies, post disaster relief and humanitarian funds)

• Regulatory hurdles

• Cultural hurdlesRegulatory challenges

Thoughts on Potential Contributions of Insurance Industry to Improve Societal Resilience to EE & CR

Influence policies, strategies and investment approaches in DRR, CRM

Opportunities for data exchange, data policies and national data platforms

Share knowledge:

Cost/benefit analysis of preventive measures

Know-how, experiences, lessons learned and best practices on topics such as:

• Preventive and preparedness measures for reducing impacts of EE and CR,

• Multi-peril resilient building structures,

• Building codes and related regulatory & legal frameworks

Facilitate penetration of DRR and climate adaptation strategies in economic sectors (through clients)

Share risk modelling tools and capacities

Strategies, products and market development with the view to sustainability and institutionalization

Motivate high-priority research topics and reports

With internationally coordinated science and socio-economic research programs

16

Mechanisms for Systematic Industry Engagement to Help Build

Resilience and Pave the Way for Penetration of the Insurance

Engagement in International Framework Agreements and Processes (UNISDR, UNFCCC, SDGs)

Promoting costs/benefits of preventive strategies

Promote role and benefits of insurance as integral part of sustainable DRR and CR management

Share expertise and knowhow in prevention & sustainable insurance programs

Promote open data policies, standards and development of hazard, loss and damage data platforms

Influence policy, regulations, investments, strategies, standards (global, regional, national)

Engagement with Organisations involved in Insurance in relation to DRR and CRM

Gain insights on international interventions in insurance and national and regional developments

Engage with guiding sustainable and viable insurance concepts and programs

Leveraging opportunities and promoting role and benefits insurance as integral part of sustainable DRR/CA strategies

Influence policies, regulations, investments, strategies, standards

Targeted Partnership for Development of Sustainable Solutions for Insurance

Opportunities for engagement from early stage, building trust and meaningful cooperation

Cost/benefit analysis and risk modeling support

Sharing experiences, practices and lessons learned

Educate on role, benefits and requirements insurance/reinsurance

Innovation, institutionalization and sustainability: Policies, regulations, products, clients, markets penetration

Engagement with Coordinated EE + Climate Research Programmes, Operational Networks

• Engage with coordinated global network of climate and EE research and operational services

• Motivate/promote high-priority research activities and related investments

• Promote/scale up public-private-scientific cooperation

• Commission synthesis reports and studies





in EE + CR


CR


AGENDA

18

“Insurance is a vital tool in the development and sustainability of both

emerging and developed economies.

It promotes stability in the global economy for individuals, institutions and

governments by taking on risk and dispersing them around the world through

the global reinsurance markets.

In the face of increasing economic costs caused by climate-related disasters,

it is vital that the full potential of insurance and reinsurance is harnessed

effectively”

Shuzo Sumi, Chairman of Tokio Marine and Co-Chair of Climate Risk and Extreme Events Working Group (2014)

19

Building Blocks for Development of GA’s Strategic Priorities

and Systematic Implementation Plan in EE + CR

1. Consultation with GA Members

Understand priorities, challenges, perceptions, receptivity to engage,

research capacities, gaps and interests in EE + CR

5. Regulatory concerns & developments

Overlap with EE + CR?

2. Opportunities through UN Framework Agreements,

strategies, implementation processes, institutions,

initiatives(DRR, CC, SDG)

Policy, regulatory, financing, management, risk modelling and

data-related issues

EE + CR Strategic Priorities and

Implementation Planning

3. Scientific and technological developments in EE + CR

Progress, trends, directions, uncertainties

4. Potential Strategic Partnerships & Alliances

in EE + CR

e.g., World Bank, UNISDR and other UN agencies, OECD,

international scientific networks

Leveraging Internal and External Meetings in 2015

4/15 5/15 7/156/15 9/15 12/158/15 10/15 11/153/15

WCDRR III - Sendai

FFSA COP 21 Preparations- Paris

GA WG EE &CR -Paris

GA General Assembly -Singapore

SCOR Int’l Scientific Conf. in CR (with GA and Toulouse School of Econ)

AXA Seminar on CR - TBD

US NAS Workshop Role of Insurance in Resilience -DC

UN Summit SDGs -NYC

UNFCCC COP 21 -Paris

7th FFSA Annual Meeting- TBD

GA Meetings provide the opportunity to: • Finalize TOR of GA WG on EE and CR• Brief WG on EE + CR and the members on

developments in EE + CR• Consult on approaches and engage CEOs

and their organisations with development of strategic priorities and implementation planning

• Map relevance of DRR, CC, SDG framework agreements and processes for development of GA’s EE + CR strategic priorities and implementation planning

Members’, associations’ and other relevant meetings: • Define and identify examples demonstrating

role and benefits of insurance in resilience • Engage and discuss with strategic partners

on policy, regulatory, strategic, management, financial, scientific directions and trends in EE + CR

• Thematic priorities, latest developments, practices, etc.

WB-AXA-SWISS RE Indexed Ins -Paris

UN Financing Develop’t –Addis Ababa





in EE + CR

Strategic positioning and planning of GA’s research and advocacy in EE + CR

Overall Approach to GA’s EE + CR Strategic and Implementation Planning

First year goals: Three tier approach

Next Steps: timeline and milestones

22

Discussion and Feedback

Thank you

Maryam Golnaraghi

Director of EE + CR

[email protected]

23

Top 10 Costliest Events (1980–2013)

Source: Munich Re, NatCatSERVICE, 2014

Year Event Affected Areas Overall losses(US$ billion)*

Insured losses(US$ billion)*

2005 Hurricane Katrina and Strom Surge

USA: MS, AL, FL 125 62.2

2011 Earthquake –Tsunami

Japan: several prefectures 210 40

2012 Hurricane Sandy Bahamas, Cuba, DR, Haiti, Jamaica, PR, USA, Canada

68.5 29.5

2008 Hurricane Ike USA, Cuba, Haiti, DR, T&C, Bahamas 38 18.5

1992 Hurricane Andrew USA: FL, LA; and Bahamas 26.5 17

2011 Floods Thailand 43 16

1994 Earthquake USA: CA 44 15.3

2011 Earthquake New Zealand 20 14.6

2004 Hurricane Ivan and Storm surge

USA, Caribbean, Venezuela, Mexico, Colombia

23 13.8

2005 Hurricane Wilma Bahamas, Cuba, Haiti, Jamaica, Mexico, USA

22 12.5

* Original Values

Intergovernmental Panel on Climate Change (IPCC)

Established by WMO and UNEP

As a mechanism to engage global scientific community and assess scientific consensus, based on peer review process

IPCC process:

ASEAN, CAREC, SASEC, APEC (with Pacific)

Working Groups I: Physical scientific aspects of the Earth’s climate system and climate change

Working Group II: Assesses vulnerability of the socio-economic and natural systems to climate change, - and + impacts and adaptation options

Working Group III: Assess options for mitigation through limiting or preventing C emissions

TFI, TG

Issues Three-part Assessment Reports with a summary for policymakers every ~ 5-6 years

5th Assessment Report—WG I report was issued in 2013

On request of UNISDR, issued The Special Report on Extremes…

26

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• Unable to maintain the

observing networks

• Not maintaining hazard data

systematically

• Need data rescue & Data

Management Systems

• Need Standards for:

• Monitoring

• Hazard database and

metadata

• Analysis tools Statistical

analysis Climate

modelling• Human expertise

Source: 2006 WMO Country-level DRR survey

http://www.wmo.int/pages/prog/drr/natRegCap_en.html

And tsunamis…

Following the 2004 Boxing Day Tsunami in Indian Ocean:

Major developments in monitoring, detecting, modelling and issuing tsunami warnings

Efforts are coordinated by UNECO-IOC through regional and global intergovernmental coordination groups

Tsunami information is collected and processed at three designated centers (Alaska, Honolulu, Japan) –More centers are being negotiated (Porto Rico for Atlantic, France for Mediterranean)

RMS CAT modelling to quantify tsunami risk around the world

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