Reinsurance and catastrophe bonds are used to protect and safeguard funds for specific incidences . By partnering with reinsurers who specialise in certain climate events and have a higher appetite for risk , insurance brokers can provide their customers with appropriate policies at more affordable prices . Catastrophe bonds allow funds to be locked away , accruing high-interest only to be released under certain circumstances , such as hurricanes . Not only does this provide insurers with immediate access to funds , but obligations to pay interest or repay principal is either deferred or forgiven , massively reducing the monetary burden on the broker .

Parametric insurance creates more affordable products as , similar to catastrophe bonds , these only trigger a payout if customers experience events of a set magnitude , rather than just covering losses . “ It ’ s a win-win ,” says Adam Rimmer , CEO of parametric insurance broker FloodFlash , “ parametric insurance is the best and most efficient way to cover these low-frequency , highseverity events .” Parametric insurance removes the need for insurers to continually assess the risk every year , which somewhat alleviates dependence on unpredictable data .

Making smart IoT tools and funding climate technology help contribute to climate research and improve predictions . One insurer using technology to battle climate change is Reask . “ We now have improvements in seasonal weather prediction [ showing ] 1-6 months ahead what the global state of the climate will be ,” says CEO Jamie Rodney . The more insurers use monitoring tools , the cheaper and better-available they become .

Enforcing change at a policy level by leveraging products such as more preferable premiums for policyholders who use resilient construction materials that can better withstand a climate emergency . This can also include developing products that support and encourage policyholders while they transition their operations to low- or no-carbon solutions , moving insurance from ‘ detect and repair ’ to a ‘ predict and prevent ’ model that will help to increase climate resilience globally .

Providing warnings ahead of events is achieved by insurers using parametric devices as well as foresights from new forecasting technologies to raise the alarm on imminent climate emergencies . “ We have a forecasting model that lets our customers know up to two days in advance when a flash flood is going to hit a property of theirs ,” says Johnny Stubbs , Head of Partnerships at Previsico . This gives customers time to “ put in place their action plan , they can move stocks and assets , their cars ”.

Helping to educate customers and influence policy regarding the risks and what steps can be taken to prevent potential damages . Though many consumers still see insurers as the enemy , a major function of the industry is to educate consumers about how to reduce their personal risk , as well as influence government policy to ensure that public exposure is minimised . It ’ s the responsibility of the industry not only to adhere to policy , but to drive it .

74 January 2023