The cost of living – navigating climate resilience

The world is indisputably witnessing a surge in climate-related risks.

These come with adverse financial, economic and biological consequences being felt by governments, communities, businesses and individuals.

The Pacific region is particularly vulnerable to the impacts of climate change due to its geographic location and dependence on natural resources. Travelling events like Cyclone, Fire, Flood and Storm have plagued our region with increasing frequency and severity in recent years. This has placed significant impact on government funding and its ability to reinstate cities, towns and land in the wake of climate devastation. 

Each and every day, we are faced with harrowing examples of the real and present dangers of a warming world. From the severe drought crisis gripping rural Australia, to the heartbreaking damage to our Great Barrier Reef, the loss of land and homes to sea level rise and the devastating toll of more destructive storms and floods. The future has arrived.

Source: Oxfam

The escalating impacts of climate change in the Pacific region and around the world have necessitated a re-evaluation of traditional insurance practices and coverage to address the increasing risks associated with extreme weather events, rising sea levels, and other climate-related hazards.

Traditional methods are no longer enough

The escalation of climate-related events has resulted in higher claim pay-out costs for insurers, resulting in increased premiums to offset these increased risks, making cover more expensive for individuals and businesses. In some cases, insurance companies may choose to limit coverage or withdraw altogether from high-risk areas, leaving individuals and businesses vulnerable when it comes to climate-related risks. The insurance industry is also grappling with the challenge of accurately assessing and pricing climate risks, as the frequency and severity of such events continue to evolve. 

This highlights the urgent need for the insurance industry to adapt its strategies, enhance risk assessment models, and promote resilience measures. This requires collaboration with governments, policymakers, and other stakeholders to address the growing challenges posed by climate change.
 

Is there a solution?

Howden are already tackling these challenges head-on by actively pursuing global solutions and engaging our trusted partners to offer alternative facilities that provide cover, either where no cover has previously existed, or cover can no longer be sourced at a reasonable cost, if at all. The way in which these offerings are implemented look beyond traditional insurance programs, and offer real hope in uncertain times.

Examples of how we are helping our clients both locally and internationally include:

• Private Capital arrangements like Howden’s “Humanitarian Resilience Trust” - An independent fund overseen by a professional committee to assess hundreds of disaster relief projects to provide them with pre-emptive finance. See Disaster Relief Brochure page 8
• Parametrics – a dedicated risk transfer vehicle using data and analytics to deliver instantaneous, direct payment as soon as a defined event or catastrophe occurs. See dairy article 

Globally and within the Pacific, we have access to climate risk teams who are doing incredible work with innovative approaches to risk-based protection using data and technology. 

Below are 3 great examples of life-changing solutions Howden has helped deliver for our clients and their greater communities.
Here’s how – planning to showcase the examples below:

• Howden has partnered with UNCDF in Fiji
• Jamaican Hurricaine Parametric Product
• Coral Reef Parametric Cover, TNC, Hawaii

Not only are we acutely aware of the challenges faced, we are actively providing alternative solutions to benefit not only our clients but their communities as well by leveraging both our internal and external expertise

 

– Craig Harms, Head of Alternative Risk Management, Howden Pacific

Time to act

Despite the ever-evolving climate situation that threatens to overwhelm the traditional insurance market, Howden is working with its clients and the industry more broadly to explore sophisticated climate risk-based solutions that can offer the protection desperately required.