November ITL Focus: Resilience and Sustainability

ITL FOCUS is a monthly initiative featuring topics related to innovation in risk management and insurance.

This month's focus, sponsored by Oliver Wyman, is Resilience & Sustainability

November 8, 2022

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FROM THE EDITOR

As I talked with speakers following the recent Global Insurance Forum about resilience and sustainability, I got the sense that the industry is leaning into climate change much more than in the past. That's partly because events such as Hurricane Ian dramatize the risks but also because insurers are seeing ways to help clients and, more broadly, society, while also seeing business opportunities.

For instance, as you'll see in this month's interview, Alex Wittenberg, a partner with Oliver Wyman, said that forward-thinking insurers will offer modifications to policies "to encourage people to build back green after a catastrophe like Ian. Companies are already making some accommodations in property policies, so someone who suffers a loss doesn’t have to rebuild to the original conditions with the same materials of the same quality but has the flexibility to make the property more resilient."

Others have talked about how the industry can use its sophisticated models to send signals that go further into the future than happens now. At the moment, insurers basically send a one-year signal about risk, through the pricing of a policy renewed annually. Those signals are certainly useful -- and huge increases in some premiums are shaping decisions now about whether and how to rebuild in Florida following the devastation from Ian -- but whatever is built now needs to have the next 20, 30 or 50 years in mind.

Ken Mungan, chairman of Milliman, had what I think is a very clever idea for how insurers (and pension funds) can use their investment portfolios to help finance climate initiatives, as I described in a recent column.

We obviously have a long way to go on resilience and sustainability, and I don't think we're moving fast enough, but we do seem to be making some progress, both in helping society, writ large, and in finding new ways to serve customers. That'll have to do for now.

Cheers,
Paul

The industry is leaning into climate change much more than in the past. That's partly because events such as Hurricane Ian dramatize the risks but also because insurers are seeing ways to help clients and, more broadly, society, while also seeing business opportunities.

In this month's interview, Alex Wittenberg, a partner with Oliver Wyman with over 20 years of cross-industry experience, said: "I think there's going to be an opportunity for some new products, especially around things like voluntary carbon markets, which are entirely new and will require a new suite of products. If I buy $100 of carbon credits that are going to materialize in 10 years, they need to materialize in 10 years. There's a lot that can happen between then and now, so you have to think through, well, is there a guarantee or an insurance product that someone can offer?"

Making progress is especially important in the insurance world, so much so that our focus this month is resilience and sustainability. It is an ever evolving topic, but we face the challenge of keeping up in order to help society and serve our customers.

Read the Full Interview

"...to encourage people to build back green after a catastrophe like Ian. Companies are already making some accommodations in property policies, so someone who suffers a loss doesn’t have to rebuild to the original conditions with the same materials of the same quality but has the flexibility to make the property more resilient"

—Alex Wittenberg

Read the Full Interview

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This Month Sponsored by: Oliver Wyman

Oliver Wyman is a global leader in management consulting. With offices in more than 70 cities across 30 countries, Oliver Wyman combines deep industry knowledge with specialized expertise in strategy, operations, risk management, and organization transformation. The firm has more than 5,700 professionals around the world who work with clients to optimize their business, improve their operations and risk profile, and accelerate their organizational performance to seize the most attractive opportunities. Oliver Wyman is a business of Marsh McLennan [NYSE: MMC].

For more information, visit www.oliverwyman.com. Follow Oliver Wyman on LinkedIn and Twitter @OliverWyman.