The professionals in charge of risk management, the global reinsurance industry, are still trying to assess the likely costs of this year’s extreme Atlantic hurricane season.
– Hurricane Maria is the strongest storm to hit the US territory of Puerto Rico in nearly 90 years
– Category 3 hurricane on the five-step Saffir-Simpson scale, with sustained winds of up to 125km/h
– At least six people have been killed in Puerto Rico and almost 30 across the Caribbean with numbers expected to rise
– Puerto Rico is $73bn in debt and is without any core infrastructure investments
The fear among some risk assessors is that climate change means some assets may become uninsurable in the future. The risk is that extreme weather means claims will rise faster than expected and that premiums will not be adequate to cover the shortfall.
In the insurance world, this is known as the protection gap.
Puerto Rico is currently recovering from the first direct hurricane hitting the Caribbean island in decades. The neighbouring Virgin Islands have also seen severe damage in the wake of hurricane Maria, with coastal communities bearing the brunt of the storm’s force.
But with the world’s climate facing unprecedented and alarming change, including soaring land and sea temperatures, many people are questioning the cost of the increasing atmospheric changes.
Furthermore, should the predictions of a more common pattern of destructive environmental incidents come to fruition, is insuring assets a thing of the past?
Peter Zimmerlin, head of the department of atmospheric peril at Swiss Re, one of the world’s biggest reinsurers, says he doesn’t believe this is the case.
“I think there is enough capital available that can be utilised to protect these risks. The reason for a protection gap lies in other areas.”
According to Zimmerlin, it is key to prepare for a payout in case these events do take place.
“Preparing is a very important part of this. It is at the core of the business we are doing. It means ensuring we have enough money to be prepared to pay out in case such events happen. In terms of short-term preparations right now, when these events are unfolding, obviously we are in very close contact with our clients and the brokers, and we try to reach out and see how we can support them.”
Regardless of the rate of climate change, there is an inevitability to the atmospheric changes affecting the world and how companies conduct their business – the reinsurance industry is also prone to this.
“We have to keep aware of what science tells us in terms of the frequency and also the intensity of these natural catastrophes. All the big reinsurers have that on their priority list in order to be aware of and anticipate changes that may happen.”
Source: Al Jazeera News