Insurance heads speak out on climate change
The South Africa Market Watch, one of Alexander Forbes’ signature insurance industry publications, recorded the views of CEOs from several leading South African insurers on climate change.
Ian Kirk of Santam identified climate change as one of the greatest threats to the planet in general and to developing countries in particular since climate variation threatened the sustainability of communities the world over. Given these challenges “the global insurance industry was well placed to use its collective expertise to assist in mitigating climate change if all role-players in the industry worked together” said Kirk.
Guy Munnoch, CEO of Zurich, identified water, flooding and drought as the most immediate impact of climate change on South Africa and that the country’s underinvestment in dams and reservoirs “was a threat to our ability to manage climate change successfully” said Munnoch.
As with power generation, “channels may have to be opened up for private interests to participate in the water infrastructure segment if the country’s future supply was to be ensured” added Munnoch.
Nic Kohler of Hollard argued that climate change meant that the insurance industry needed to act as a collective to promote sustainable development – by investing in skills development, risk management, financial education and transformation. “The insurance industry’s potential to grow our economy is vast as insurers are involved in every sector of our economy – none excluded” said Kohler.
Even though South Africa was not subject to natural disasters like those in Chile, New Zealand and Japan, Reinhard Franke, CEO of Chartis, believed that “these events should remind South African companies that their foreign assets can still suffer catastrophic exposures from natural disaster or climate change”.
Certainly Chile, where Chartis and Alexander Forbes were called upon to pay a large claim, illustrated the importance of having an effective global insurance programme in place in an age of climate change.
Chris Brits, Executive Leader, Alexander Forbes Risk Engineering added that the ongoing power and impending water crisis in South Africa demonstrated the dire need for sound business continuity planning and emergency preparedness even in normal times.
In addition, “climate change raised serious and necessary issues of long term sustainability that, of all industries, insurance offered a partial solution in the broader risk finance strategy” said Brits.
Environmental risks and natural disasters play a larger role in enterprise wide risk management (EWRM) today than previously. As such the “need to identify and measure potential environmental and catastrophic exposures will be central to business sustainability in future.
Certainly, “the scale of the effects of global warming and natural disasters and the uncertainty surrounding many of these events will demand that organisations plan for such eventualities in future” predicts Brits.
Yet many businesses’ in South Africa fail to see the potential benefits of a good EWRM process as they mistakenly believe South Africa to be immune to many of the significant climate change issues being experienced elsewhere.
Even if South Africa is not immediately hit by many of the negative consequences of climate change, getting a good EWRM process in place has important positive spin off in the areas of alternate revenue streams, diversification, improvements to product life cycles, organic growth, niche markets etc.
As such regardless of the current impact of climate change “getting a good EWRM process in place now offers a significant competitive advantage and, in some instances, positions organisation’s to better meet their objectives” concludes Brits.
