Webinar panellists concur that insurance should be the last line of defence for risk managers seeking to mitigate the threats posed by climate change

Businesses cannot just rely on insurance cover to protect them from the threats posed by climate change, according to Amar Rahman, global head of climate and sustainability solutions at Zurich Insurance.

Speaking during a webinar hosted by Insurance Times’ sister title Strategic Risk – sponsored by Zurich Insurance and chaired by Insurance Times editor Katie Scott – Rahman explained that insurance should not be viewed as the sole method of mitigation for climate-related risks. 

Instead, any policy incepted should be considered as just part of the risk mitigation story.

Addressing listening risk managers, Rahman said: “You need to take an operations and strategic view of the risks posed by the climate [to] your business. As with any other risk, be it your car or protecting an asset from risks such as fire damage, you would not simply rely on insurance.

“In terms of fire risk, you may well look to install sprinkler systems and fire retardant materials. And in [the] case of the car, you would ensure it was well maintained and that it [was] driven with care and attention. To rely solely on insurance would simply be a case of bad risk management.

“There needs to be a focus on resilience.”

For Rahman, this focus needs to be an immediate priority as the effects of climate change can be felt today – it is not a far-fetched future event.

He continued: “When [risk managers] look at [their] strategy, [they] have to remember that climate change will not happen in 30, 50, or 100 years’ time. It is happening now.

”We are looking at how we can work with clients to develop new tools to mitigate risks. However, we all too often talk about the extreme and physical risks, such as weather events.

“There is another area which has to be factored into risk planning and that is the environment. By that I mean the rising population and changing demographics in the areas in which you live and [where] your business operates. Infrastructure is deteriorating and is being stretched beyond its design limits.”

Rahman added that the ”skills needed to assess climate risk are highly specialised”, meaning that insurance surveyors ”need to look at climate change at a site level”.

He said: ”It is not just looking at the resilience to immediate events, such as wind and flood. There are also long-term and chronic risks, such as heat and access to water, coupled with the impact on employee health.”

The webinar’s panellists – which also included Annacel Natividad, chief finance and chief risk officer at Aboitiz Food Group, and Markus Noethiger, group head of ESG at the Serra Verde Group – agreed that insurance cover should be the last line of defence in terms of risk management.

Wider impact

Rahman added that climate change was having an ever-greater impact on global supply chains too.

“Every time we turn on the news, we see the impact of climate change,” he continued. “It is not only impacting supply chains and the physical assets of the business, it is impacting employees and their families and the communities in which companies are based.

“It is getting more complex and the risks are becoming more interconnected. Businesses of all sizes are affected.”

Noethiger agreed that climate change and its impact was already being felt by all.

“We are beginning to see the real apex of physical risks,” he explained. “Earlier in the year, The World Economic Forum released its global risks report in which [it] said climate change is no longer a risk – it is a reality.”

He warned that regulation was impacting businesses’ ambitions around managing the climate transition.

He explained: “Regulation is having an affect and we have seen [environmental, social and governance agendas] now being politicised, with greenwashing regulations challenging companies’ climate activities. It has led to companies taking back their climate targets.”

What is your view on how climate change is impacting risk management?

Strategic Risk is working with insurer Zurich to better understand how climate change is affecting risk managers. Share your perspective in this short survey today.