Climate risk: ESG challenges and opportunities

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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.

ESG: the insurance challenges and opportunities

When it comes to ESG, what is reported can differ greatly for each insurer. Insurers are increasingly looking at environmental issues outside of only greenhouse gas emissions, as highlighted by AXA’s 2022 Climate and Biodiversity Report, but there is no consistency in reporting approaches. 

Other challenges in reporting and measuring include inconsistency in ESG-related data collection and scoring from third-party providers. The UK’s Financial Conduct Authority (FCA) recently released a paper highlighting concerns about the consistency of ESG scores from different providers. The FCA states that it would welcome the government’s proposals to bring these providers “within its regulatory perimeter”.

Our recent article gives an overview of the key ESG insurance issues and opportunities. For a more in-depth review of these topics, you can download our Climate Change Risk Regulation and Measurement report here.

Capgemini podcast: Innovation, integration and culture as core competence

Capgemini is an information technology services and consulting company partnering with businesses to develop innovation and integration solutions. In this podcast, Matthew talks to Kristofer le Sage de Fontenay, the Vice President, Insurance Leader UK, about how Capgemini is working with partners such as Guidewire and Duck Creek. They also discuss how the company is managing sustainability and taking actions to reduce its own carbon emissions - and assisting its clients.

Member briefing: Key trends in parametric insurance

We are hosting a member webinar on 6th September 2022. We will be providing an overview of the parametric insurance market and will cover case studies of various applications of parametric insurance, including for climate perils. If you work for one of our member organisations and are interested in attending, please email iryna@instech.co for further information.

In the news…

Fathom and Reask partner to create combined flood and wind risk models

Initially, the partnership will allow each company to sell the other’s products and services to both new and existing clients. In 2023, the two companies will work together on new hazard data maps and catastrophe risk models covering the combined perils of flood and wind. Both companies were profiled in our 2022 Climate Change Risk Regulation and Measurement report - download for free here to read more.

Previsico launches in US market

In partnership with Nexus Alpha USA, Previsico has launched its live flood forecasting alert service to mitigate surface water flood losses for insurers and their customers in the US. Previsico’s initial focus will be on New York, but other states such as Nevada will follow as demand increases. To learn more about Previsico’s solutions, read our interview with Co-founder and COO, Dr Avi Baruch.

Berkshire Hathaway expands partnership with Zesty.ai

The Berkshire Hathaway Homestate Companies (BHHC) is to extend the use of Zesty.ai’s wildfire risk model to 12 states. BHHC will use the model to inform both underwriting and rating decisions. Kumar Dhuvur, Co-founder and Head of Product at Zesty.ai, joined Matthew on a recent InsTech podcast to discuss how the company helps insurers understand climate risks.

Claims from South Korean floods likely to exceed $110m USD

According to a Fitch Ratings report, the severe floods in South Korea will put pressure on the financial performance of the country’s non-life insurers. The torrential rain, which started on 8th August, registered as the highest hourly rainfall since Korea’s weather observations began over 100 years ago. According to the General Insurance Association of Korea, 12 motor insurers have received over 9,100 claims.

Aon collaborates with University of California on US wildfire modelling

Using research on changes to future fire weather behaviour in the US, the collaboration will support the development of climate-conditioned fire danger indices. These indices will then be used as inputs to create climate-conditioned wildfire event catalogues, which are considered a required metric for incorporating climate science into a catastrophe modelling framework. The climate-conditioned catalogues are to be released in 2023.

CAPE Analytics and Geosite join Socotra’s app marketplace

Socotra is building a cloud software app marketplace for insurers. Socotra has announced 12 partners which are developing apps, including CAPE Analytics, Geosite and Verisk, which will provide rebuild cost estimate data. To learn more about how property attribute data is used to determine rebuild costs today and in the future, you can download our report produced in partnership with CAPE Analytics here.

Marsh, Liberty Specialty Markets and AIG create reinsurance facility for hydrogen projects

The facility will provide up to $300 million USD of cover per risk for the construction and start-up phases of global green and blue hydrogen projects. Green hydrogen is when the energy used to power electrolysis comes from renewable sources, and blue hydrogen is produced using natural gas. The facility will provide risk transfer options for all construction and operational phase property damage risks, along with marine cargo, business interruption, general third-party liability and contingent delay-in-start-up insurance.

FM Global policyholders to receive $300m ‘resiliency credit’

FM Global is offering 5% premium credit to customers which has the potential to "help those organisations reduce total loss expectancies related to wind, flood and wildfire exposure by more than $120 billion". FM Global also plans to introduce a new suite of climate resilience solutions to help clients assess their climate risk exposure.

Cost of severe UK floods could rise by 42% with climate change

According to JBA’s UK Flood Model, the cost of a 200-year flood event could increase to £5bn by 2050 with an intermediate emissions scenario (RCP4.5). If there is no action to reduce emissions, there could be an increase of up to 87% in average annual losses to UK residential properties. The model has also shown that whilst river flooding remains the dominant risk from climate change, the greatest change in flood losses comes from coastal flooding.

Demex launches snow insurance backed by Markel

Demex, founded in 2020, structures parametric insurance and derivative solutions for organisations to transfer non-catastrophic extreme weather risk. The company has announced its snow insurance product, backed by a subsidiary of Markel. For snow removal contractors and snow-dependent businesses, claims are triggered when snowfall is extremely low. For property owners and facility managers, claims are triggered when snowfall is extremely high. Demex is profiled in our recent Parametric Insurance in 2022: the 150+ Companies to Watch report.

Arbol forms captive insurance company

Arbol provides parametric climate and weather risk management solutions for the agriculture, energy, maritime and hospitality sectors. The company has recently announced the formation of Climate Risk Insurance Company, a captive insurance company focused on helping businesses and corporations manage a range of climate risks, including temperature, rainfall and storms.

Partner interview: Addresscloud and Send Technology

In this interview, Mark Varley, Founder and CEO at Addresscloud, explains the geocoding approach to address matching, why it is more accurate than using postcodes alone and some of the implications of an inaccurate address. Addresscloud has worked with Send for over two years, providing access to rooftop-level address, property and perils data.

Gamma partners with Superscript to drive innovation in small business insurance

Using Gamma’s location data, Superscript will be able to further personalise the insurance experience for its clients and partners. Superscript now has access to peril-related insights for flood, subsidence, arson and burglary. These geolocation factors are being used to enrich Superscript’s underwriting data and enable it to automatically rate the risk to individual properties across these areas.

Percayso Inform partners with WhenFresh for property data

Percayso Inform, founded in 2018, provides data and analytics to the insurance industry. The WhenFresh partnership will support the further development of Percayso’s property data capabilities for providers of household and SME insurance. WhenFresh’s API offers access to property attributes, risk, perils, environmental and valuations data.

Liberty Mutual joins MIT’s Climate and Sustainability Consortium

Liberty Mutual Insurance has joined the MIT Climate and Sustainability Consortium (MCSC), supporting the acceleration and implementation of large-scale solutions to address climate change. Liberty Mutual will support MCSC in advancing proposals regarding sustainability opportunities, training for innovators, regulatory policies and the development of business models across sectors.

Xceedance: how changing catastrophe patterns impact claims

In the last instalment in a series focused on the insurance implications of the changing catastrophe landscape, Xceedance looks at trends in wildfires, hurricanes and tornadoes. The article describes the challenges in responding to a catastrophic event and how technology can be used to help.

Oasis Loss Modelling Framework and Swiss Re conference - registrations open

The annual conference will take place in Switzerland on 28th September. It will cover how to use and deploy Oasis and the challenges in unmodelled elements of most catastrophe models. The panel will consist of (re)insurance experts, academics and others.

Tensorflight appoints Jakub Dryjas as CEO

Tensorflight has appointed Jakub Dryjas as its new CEO, following Zbigniew Wojna. In his new role, Dryjas will lead marketing, client acquisition and funding, and will oversee business strategy and development. In our recent interview with Tensorflight, we cover how insurers can access the company’s property insights and which insurers the company is already working with.