Insurance alone cannot bridge Nat-Cat losses, caution experts

Preparatory steps, proper planning, and time-tested constructions are prerequisites for preventative solutions. Insurance can only nullify financial losses but the real challenge is triggering a forceful economic chain for a sustainable future

Satyajit Tripathy, CMD, United India Insurance Company, emphasized the need for a collaborative effort between insurance companies and the government in order to handle losses on a more sustainable basis.

He was speaking at the 5th NIA-Swiss Re International seminar on ‘Mitigating Emerging Risks through Innovative Risk Solutions’ under the joint aegis of National Insurance Academy, Pune, and Swiss Re, in Mumbai recently.

Dwelling about the 1999 super cyclone that wreaked havoc, he said that the response mechanism was to build reinforced concrete structures to act as the first point of rescue and having adequate stock of food and medicine to the evacuees so as to reduce the impact in future catastrophes. Predictive analysis by aviation experts has forecast severe air turbulence in northern India by 2050, requiring a re-look into strategies adopted by the industry, he said.

Insurance, however innovative, cannot be a stand-alone solution to Nat-Cat losses, as the capital required would be enormous. Preparatory steps, proper planning, and time-tested constructions are prerequisites for preventative solutions, he maintained. Insurance can only nullify financial losses, but the real challenge is triggering a forceful economic chain for a sustainable future.

In his presidential address, Devesh Srivastava, CMD GIC Re, said, “We are the first generation to witness the impacts of climate change and perhaps the last generation equipped with the power and resources to initiate remedial measures. Cyclones were once a regular occurrence along the east coast, which today has gradually shifted to west coast. Unfortunately, unlike in the past, most of today’s disasters like are man-made.”

Saurabh Mishra, Joint Secretary, Ministry of Finance, in his keynote address, said that rather than getting intimidated by daunting statistics, the need f the hour was in undertaking incremental and

fundamental changes. He called upon students and youth to become climate advocates and spread awareness about maintaining eco-balance in every human endeavour.

While stressing on the need to think in terms of using renewable energy sources like solar, biogas, and wind power, he urged everyone to adopt carbon-conscious practices in their daily lives. The insurance industry, in particular, should prioritize green premiums and not solely on premium targets. Only when targets translate into proactive measures can we bring about a meaningful change, he said.

Later during a panel discussion on ‘Tech based risk solutions for climate risk mitigation’, G. Srinivasan, Director of National Insurance Academy, highlighted the adverse impacts of climate change on social well-being at both the individual and societal levels. He pointed out that increasing emission levels, melting of ice, and rising temperatures contribute to the woes of the adverse impacts that climate change causes. He said that Nat-Cat events had caused economic loss of $ 268 billion, of which only $ 128 billion were insured losses. The quantum of losses was much higher than the 10-year moving average figures of the past. He also drew attention to India being the second most vulnerable country to climate losses, with a protection gap as high as 90% for Nat-Cat losses, which is an area of concern.

Srinivasan appealed to the experts and policy makers to think on how the insurance sector could promote green strategies by insuring the right kind of green projects and plan investment strategies.

Hadi Riachi, CEO of Swiss Re India, spoke about the interconnected nature of risks in a world increasingly affected by climate change. He

outlined five key risks that arise from climate change, including food crisis, energy crisis, supply chain disruptions, geopolitical crisis, and inflation. Riachi emphasized the long-term and intergenerational nature of climate risks, which can amplify and exacerbate other consequential risks. Climate change affects agriculture productivity, thereby causing food security concerns, Riachi said adding that in the last 15 years, 310 extreme climate events had occurred in India, leading to 14 million forced migrations and geopolitical tensions between countries. Riachi stressed that the health impact of climate change is the most significant but least talked-about issue. He emphasized the need for a whole-of-community approach to build bridges between the public and private sectors to come up with inclusive solutions for the transition, cutting across industries and enabling the public to play its role as a key stakeholder. Stressing that climate change is real, he called upon everyone to understand that the time to act was now.

Renjit Gangadharan, Chair Professor (General Insurance) National Insurance Academy, Pune, proposed the vote of thanks.