Franck Baron, chairman of the Pan-Asia Risk & Insurance Management Association (PARIMA), has called on risk managers to ensure their companies act with more urgency on climate change and invest more in resilience.
Baron, who is also group deputy director, risk management and insurance, at International Insurance SOS, was speaking at the opening plenary of Parima’s virtual conference, subtitled Resilience Week 2.1, which addressed sustainability and moving from statement to reality.
“It has never been clearer. Businesses are operating in a world where it is not enough to talk the talk where the climate crisis is concerned. Failing to act has grave legal, regulatory, reputational and ultimately existential consequences. The time to act is now,” he said.
Risk managers are well placed to communicate this message and the importance of embedding good ESG risk practices, added Baron.
He also called for more incentives from governments to encourage companies to invest in resilience, and used the current pandemic as a reminder of the value of resilience.
“Resilience investment will continue to recover. It remains a cost but like quality and health, resilience, when linked to climate change, has no price. Rather, it is the price of everyone’s confidence in the economy,” said Baron.
Tax measures should be introduced for investment in operational resilience and for strengthening the risk financing capabilities of companies, said Baron. “This should allow them to strengthen their equity capital for risk retention provision so that they can face future shocks.”
The session also heard from two insurers about the impact of climate change and sustainability in underwriting practices. Xavier Veyry, CEO APAC and Europe at AXA XL, talked about the insurer’s Climate Academy initiative, which shares the loss and claims data from climate-related exposures to predict trends.
AXA XL has also introduced a policy where deductibles are linked to insured’s biodiversity actions. “We see tangible and direct impacts on rates based on sustainability action,” said Veyry. “The risk management community should and could be the ambassador for the idea that sustainability is the future of business.”
Underwriters have also looked to exclude certain unsustainable actions and Alison Martin, CEO EMEA and bank distribution at Zurich, stressed the importance of insurers being consistent about their exclusion policies – be that investment as well as underwriting.
She also said engagement is seen as a greater priority than exclusion when it comes to climate change. “A lot of companies have the resources to make a huge impact on climate change and if those companies have made a commitment to meet science-based targets [on emissions], but are above our thresholds, we will give them a two-year window to achieve that transition,” said Martin.
Underwriters also have a responsibility to support new technology that will help the transition to net zero, said Martin, referencing the likes of carbon air-capture technology. “The companies we underwrite are often the ones that with the greatest technology resources. So how can we provide underwriting to facilitate that transition?”