Earth Today | Reinsurer urges resilience building to blunt climate change impacts

PROMINENT GERMAN reinsurer Munich Re has noted the urgency to build resilience against climate change impacts, including extreme weather events that threaten the Caribbean and its economies.

“Climate change is increasing the frequency and severity of hurricanes. This means that we are going to see more extreme hurricanes that probably will bring more water and additional wind speed,” said Frank Buchsteiner, senior executive for client management with Munich Re.

According to Buchsteiner, who made the comment at a recent JN General Insurance Company (JNGI) event in Montego Bay, collaborative efforts are required to address the impact of climate change in the region.

“The first step is having conversations with regulators, commissioners, rating agencies, allowing different means of ensuring protection,” he explained.

The Munich Re executive added that Caribbean countries can take further steps to build resiliency by “placing special emphasis on establishing infrastructure that meet building code requirements and the production of energy”.

“There needs to be a worldwide pledge that includes the Caribbean as a region for a more sustainable approach on how we deal with the environment, and this is especially important for the Caribbean people who live on islands with a very low sea level,” he said.

Buchsteiner added that climate change is also having an adverse effect on reinsurers, who have been facing a low return on equity, resulting in some investors pulling out.

Munich Re estimates that the overall losses from the 2022 North Atlantic hurricane season amounted to some US$110 billion, with insured losses of approximately US$65 billion, which made the season the third most costly in history.

Insurance companies in the region rely on overseas reinsurance companies for up to 90 per cent of every risk that is undertaken.

Joseph Holness, assistant general manager for reinsurance and underwriting with JNGI, attested to the challenges being faced by the industry.

“The impact of climate change on insurance has been significant as the region is highly vulnerable. Due to the frequency and severity of natural disasters, insurance companies have been forced to raise premiums to cover increasing risks,” he explained.

In recent years, there have been three Category 5 hurricanes: Hurricanes Irma and Maria in 2017 and Hurricane Dorian in 2019. Hurricane Dorian, the Category 5 storm which battered The Bahamas, was the strongest recorded Atlantic hurricane ever to make landfall, with winds that reached 300 kph. It was also one of the most expensive storms in history.

Still, Holness said the industry is agile and well able to respond.

“The landscape in which we operate is continuously evolving. Climate change, global economic issues and geopolitical tensions have presented us with immense challenges. In this context, our ability to adapt, to embrace new ideas, and to foster collaboration become even more critical,” he noted.

“We firmly believe that every challenge presents an opportunity. Therefore, we embrace change, commit to adapting swiftly to emerging trends, and remain steadfast in our commitment to prudent financial management of our clients,” Holness added.