Learning is more than half the battle – climate head’s perspective on the insurance gap.

 

Introduction:

• Ernst Rauch, Chief Climate and Geo Scientist at Munich Re discusses the challenges and strategies for addressing the insurance protection gap in the face of climate change.
• Rauch emphasizes the importance of data analysis and public-private partnerships in reducing vulnerability and increasing resilience.

Unpredictability of Nat Cat Losses:

• Rauch highlights Munich Re’s data analysis of natural catastrophes (nat cat) worldwide since the 1970s.
• Half-year figures do not reliably predict year-end insured losses due to the unpredictability of nat cat events.
• Insured losses in Asia vary significantly based on event types, regions, and insurance penetration.

Vulnerability Across Asia:

• Asia is vulnerable to various natural disasters, including geophysical and weather-related events.
• Coastal regions are often more vulnerable due to higher population density and property values.
• Some Asian countries, such as Japan and parts of China, have earthquake exposure.

Protection Gap in Asia:

• The protection gap for natural catastrophes in Asia has averaged 92% over the last 40 years, indicating a lack of insurance coverage.
• While there has been moderate improvement in closing the gap in recent years, substantial work remains.

Government Regulation and Public-Private Partnerships:

• Rauch emphasizes the role of regulation and public-private partnerships in closing the protection gap.
• Mandatory insurance programs, like those for earthquakes or flooding, can help reduce the consequences of damage.
• Examples include the Toka Tū Ake EQC in New Zealand, the US National Flood Insurance Program, and the Turkish Catastrophe Insurance Pool (TCIP).

Role of AI:

• Rauch believes AI is not a significant driver in closing the protection gap, as the challenge primarily lies on the demand side.
• While catastrophe models may benefit from AI, information, education, and improved resilience are vital to closing the gap.
• Increasing risk awareness, teaching risk awareness in schools, and transparently sharing information on natural hazards is essential.

Building Resilience:

• Strengthening resilience and reducing vulnerability is crucial for addressing the changing risk landscape.
• Resilience efforts include improving building codes, land use planning, and public risk awareness.
• Reducing vulnerability can lead to more stable and affordable insurance premium rates.

Conclusion:

• Addressing the protection gap requires a multi-faceted approach, including public-private partnerships, regulation, education, and resilience-building efforts.
• Climate change is a significant loss driver, underscoring the need for proactive risk mitigation and protection measures.