As the UK is battered by the second major storm in the space of a week a leading reinsurer has said the industry needs to become more proactive in driving investment in more sustainable and climate resilient infrastructure as part of the “New Deal for Britain”.
Simon Welton, Market Head P&C UK & Ireland at Swiss Re has said the industry needs to play a bigger role in derisking the country’s future.
He explained: “Storm Dudley has caused chaos across the UK this week, with 81mph winds triggering widespread power outages and travel disruption. On top of this, the Met Office has warned of potential ‘danger to life’ as the country braces itself for Storm Eunice.
“The two storms come just weeks after Malik and Corrie claimed multiple lives, and footage of a pilot skimming the runway at Heathrow airport sent shockwaves across the UK.
“The effects of climate change will only drive more extreme weather events like this in the years to come, so this is yet another reminder of why we urgently need to strengthen resilience across the country.”
Looking to the future Welton said now was the time for industry to step up and make its presence felt as risk experts and some of the country’s biggest investors.
“On 30 June 2020, Boris Johnson revealed his ‘New Deal for Britain’ plan, committing to invest in and accelerate infrastructure construction across the UK as it set to ‘build back better, build back greener, build back faster’,” he explained. “What exactly emerges from this plan is yet to be seen but what is clear is that the infrastructure we build needs to be environmentally sustainable and resistant to the rising frequency and severity of natural hazards. This is vital if we’re going to increase our resilience to inevitable future events.
“Sea level rise with associated flooding along the coast constitutes the biggest climate risk to the UK economy. This is exacerbated by the likelihood that overall wetter weather conditions are set to increase, raising the potential for more river and flash flooding across the British Isles.”
He called on the industry to step up to the challenge of driving resilience.
“The insurance industry has three distinct roles that can be critical in the move to ensuring a more sustainable infrastructure investment framework: as investors, as de-riskers and as users of big data,” added Welton. “As investors, the industry can finance sustainable projects, helping to reduce such costs and creating incentives to build for resilience.
“By acting as a ‘de-risker’, the insurance industry could play a transformative role in establishing a longer-term investment framework. Insurers can facilitate new types of insurance offerings, standardising offerings and making cashflows more predictable, and in turn, the asset class more attractive to investors.
“Another key aspect through which insurers can shift the market to a longer-term, more resilient investment landscape is as users of big data. Firstly, the use of data can help to pinpoint where our infrastructure may be most vulnerable – therefore helping to prioritise where investment proceeds should be focused to improve durability as well as helping to avoid losses where issues are identified.
“This moves us from a world where insurance does not just finance the reconstruction after the loss, but more importantly finances activities to prevent the loss.
“Lastly, leveraging data and analytics helps us understand – and therefore tackle – the huge infrastructure needs being created by urbanisation. This is particularly important in the UK as we continue to inhabit and build in coastal towns where rising sea levels pose an imminent threat.
“The chaos caused by the flurry of storms in recent weeks – and Eunice with us now – must act as a wake-up call to the work that needs to be done and the role the industry must play within this.”
Welton warned: “As well as the economic, insured and human loss caused by the increasing frequency of extreme weather events, these incidents have highlighted the vulnerability of our UK infrastructure system.”