The insurance industry is failing to adequately address the issue of climate change, according to Barney Schauble, climate chairman at Nephila Capital, a Bermuda-based investment advisor specialising in reinsurance risk.
Schauble said: “Climate change is a huge problem and it's not one that's being well addressed by the insurance industry.”
Speaking at the MMC Rising Professionals’ Global Forum 2019 in London last week, Schauble said the insurance sector has a huge opportunity to help build more resilient societies with new products and data.
He likened the development and growth of weather risk protection products, in response to increasing awareness of climate change, to “the early days of the catastrophe ILS market.”
The development of ILS encouraged greater participation in the insurance industry among institutional investors, meaning “capital is no longer a rate limiting factor” making it “possible to focus on other ways to improve the risk transfer sector,” he said.
He continued: “If we can design new products or use new data to make better decisions, and not allow that risk to just default back to the government balance sheet here in the UK or the US or other places, not only do we build a more vibrant market with more opportunity, but that's a far more resilient economy than if we choose not to address those risks at all.”
Schauble said machine learning can help insurance companies to deliver that new generation of products.
“It's impossible to find somebody who will sit there all day and type each address into Google Earth to tell us exactly what each house is made out of, and we’ve tried,” he said. “But you can teach a machine to do that very easily.”
Nephila Capital, Climate change, Barney Schauble