2022 is the year of returning to normality. After multiple years of pandemic-induced hiatus, face-to-face meetings are once again creating chatter across the hallowed tables of the insurance market.
The next stop is Monte Carlo. The capital of the 2 square kilometre city state that is Monaco. It’s been the backdrop of the annual Rendez-vous de Septembre since 1957. An opportunity for professionals from the insurance and reinsurance industries to talk with brokers and risk managers about emerging trends and risks and how to deal with them. Monaco has become synonymous with wealth. It’s the place for the uber wealthy to moor their private yachts or be spotted in the Casino. It’s also the place that famously has high population density, zero unemployment and of course the world’s most prestigious Formula One event.
And yet amid all the lavishness, the talk is likely to be of financial losses.
Estimates suggest that globally, natural catastrophes in the first half of the year have created insurance losses worth 35 billion dollars – a substantial rise on the average of the last decade. Already we’ve seen huge pay-outs following the floods and storms across Australia, North America and Europe. That’s well before the cost of the current European heatwave is taken into account. Additionally, manmade weather events have also contributed to further losses worth about 3 billion dollars. Collectively they show that weather catastrophes are increasing in severity and frequency.
The changing climate, and the risks posed by it will define the insurance industry over the next decades. After all, climate affects everybody, globally. And therefore, this is a risk that the industry will ignore at its own peril. So, the talk will be about how the industry can evolve, because the mindsets of the past will not solve the problems of the future. That means everything must change; from the products on offer to the way that insurance works with the government and other industries.
Fortunately, the insurance industry has the financial clout to enact change. It’s already the custodian of investments measured in trillions of dollars. This gives it the means to force through generational changes and opinions, such as switching from fossil fuels to renewable energy sources. Governments around the world are setting targets for becoming Net Zero, and the insurance industry will have to be at the vanguard of this cultural shift. That also means getting its own house in order as well as convincing other industries to follow suit!
And it’s not just industry. Wider society will also need to adapt. People will need to make more sustainable choices with their finances, with recycling and with improving energy efficiency. Again, the insurance industry can help by promoting the most productive paths to choose.
The cost of enacting Net Zero in the UK is estimated at approaching 3 trillion pounds. It’s an enormous sum, and ideally it needs to be found by 2035 – that’s just 13 years away. Although other funding sources will be needed, the Insurance sector can be seen as leading the way by stumping up a hefty chunk of this sum.
But it’s not all bad news: the dividends from investing in the climate of the future could go a long way towards offsetting the costs of the weather patterns of the present.
So the big question – Will the cost of the changing weather patterns, as well as growing social and political tensions keep the insurance sector in the red or the black? After an extended break, there’s lots to discuss, and with the value of in-person meetings having been demonstrated over the last few months, it will be great to see how the Rendez-Vous can build on this.