Future Risk Report: the impact of climate change on insurance
No one could have foreseen it and yet it happened: in July 2021, exceptional floods in Belgium wiped houses, household goods and cars off the map, in just two days. Climate change has meant that such disasters are no longer rare occurrences. How should insurers or organisations with insurance modules in their offer respond to this?
The summer of 2021 is a black chapter in the lives of many Belgians. From July 14 to 16, floods caused exceptional damage, especially in the regions of Liège and Verviers. Assuralia, the professional association of Belgian insurers, registered 71,746 claims in the three months following the natural disaster, including for simple risks, car damage and other damage cases due to flooding.
Wallonia is sadly the frontrunner here with 62,440 files. Flanders has 7,902 files and the Brussels region 'only' has 1,404 files. On September 30, 2021, the total costs of insured damage for all categories together amounted to 2,164 million euros.
Insurers immediately noticed the impact in their figures, as did AXA Belgium, a customer of AXA Partners. Due to the compensation the organisation had to pay out, operating profit fell by 37 percent last year. "Obviously the financial impact has been huge," says Etienne Bouas-Laurent, CEO of AXA Belgium, "but we played our role as an insurer."
Rethinking the Climate Act
Because the total damage from the floods was so high, Belgian insurers came to an agreement with the Walloon government: they will take on a greater share of water damage than required by law.
This is only a first step in a new direction. Today insurers are negotiating with the various Belgian governments to rethink the law on climate disasters. As a professional association, Assuralia delegates its vice-president Etienne Bouas-Laurent to express the vision of Belgian insurers: 'It is certain that today the questions about the reality of this global warming are far fewer than the demand for the solutions for it. For Assuralia, the key lies in a public-private partnership, as is the case in our neighboring countries.'
A collaboration between the (re)insurance sector and governments should also ensure that it remains affordable for individuals and companies to insure risks. Etienne Bouas-Laurent : 'Assuralia focuses on collaborating with the government to sustainably deal with systemic risks such as natural disasters in the interest of every customer.'
Insure, prevent and offer assistance
Unfortunately, natural disasters that plague our country are no longer an exception. Increasing drought and extreme weather conditions are causing scorching wildfires worldwide that are increasingly difficult to extinguish or contain, causing devastating deforestation, loss of animal and human life and millions of dollars in damage every year.
Insurers must respond appropriately to this. Putting out fires is also figuratively no longer an option – a holistic approach is imperative. Insurers should also invest in better prevention and control measures. In addition, end consumers are asking insurers to do more than assess damage and pay compensation. Overall, people expect their service providers to behave more as committed partners than as suppliers.
Sustainability? Sharing responsibility
Climate change will have an increasing impact on the business strategy of insurers, says Assuralia. Consumers are also looking to them for sustainable solutions and initiatives. The Future Risk survey that AXA recently conducted shows that the general public no longer has confidence that governments will solve the climate crisis. For this, they are looking specifically to their service providers and suppliers. .
Etienne Bouas-Laurent: "Like all other insurers, AXA Belgium will scrutinize a company's efforts in the field of sustainability. Only then will we decide whether to invest in the company or write a policy for it. Companies that do not make climate efforts will be able to rely less on flexibility, although this should not become a black-and-white situation."
Co-creative towards new solutions
More than ever, new partnerships are needed to address risk and insurers have a vital role to play in addressing changing attitudes to the climate with their solutions. AXA Partners is ready to help them take up that role. Together with our business partners, we are investigating the possibilities and developing products and assistance that go beyond the traditional protection mechanisms.
Sources
- Assuralia: https://press.assuralia.be/de-verzekeringssector-in-cijfers-trends-en-overstromingen-juli-21
- De Tijd, February 24, 2022: https://www.tijd.be/ondernemen/financiele-diensten-verzekeringen/verzekeraars-zullen-klimaatinspanning-van-bedrijven-vragen/10369449.html
- AXA Future Risk Report, September 2021: https://www.axa.com/en/press/publications/future-risks-report-2021
