Climate change: an insurer’s perspective!

Insurance companies cannot help but look at the cost of climate change….

It made the headlines of the French newspapers last week, as the country struggles with worrying flooding, snow episodes and even sandstorm from the Sahara! The CEO of behemoth insurance company AXA gave an interview to share his concerns about the multiplication of climate-change triggered dramatic events.

In essence, AXA CEO Jacques de Peretti underlines that insurance companies end up footing a bill for climate disasters in France that….doubles up every 20 years, representing circa $1,2Bn in the 1980’s and growing to a staggering $3,2Bn today. Worse: predictive models flag the cost of climate change-linked events in twenty years’ time, at approximately $6Bn!

While AXA tries to reassure that the price of insurance premiums should not immediately increase, it insists on the urgent need to work on preventative measures.

Another structural trend underlined by Mr de Peretti? The growing tendency of insurers to favour parametric insurance. These insurance products will allow for quicker reimbursments of pre-recognised causal events, but will not give way to complete reimbursements to compensate losses as is the case now.

The question, as often, is the price that ultimately households will have to front and the inequity resulting from climatic events which poor and vulnerable populations -already over-exposed to these risks- will suffer from.

Governments, health stewards and regulators will have to consider the burden of this cost across the policy spectrum: from protection schemes to environment protection, fiscal policies, but also CO2 emission reductions.

The latter draws attention as the share of public infrastructure is not negligible and condones a stringent approach to decarbonize public assets including healthcare infrastructure. The Decide Capital Investment in Health working group works on this issue, and will collaborate with its partner organization BCEPS at the University of Norway, which is funded by the European Commission to research this topic. Stay tuned for more news!

Interested in reading the AXA interview (in French)? Click here