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Climate Change and natural disasters: Insuring for Resilience

Speakers Paul Barnes, Karl Sullivan, Tim Clark, Karl Jones and Duncan Bone

ASPI hosted a panel discussion exploring how segments of the resilience industry address the challenges of climate and weather-related disasters in both technical and commercial decision-making. The event brought together a panel of experts from the retail and re-insurance segments of the industry and representatives of the Actuarial Institute and the Insurance Council of Australia to exchange ideas and perspectives on supporting disaster relief.

The panel was chaired by ASPI’s Paul Barnes, head of ASPI’s Risk and Resilience Program and chair, and included the following guests:

  • Mr Duncan Bone: Executive Manager of Public Policy, Suncorp
  • Mr Karl Jones: Managing Director & Head of Catastrophe Analytics - Willis RE
  • Mr Tim Clark: Chief Actuary, Insurance Australia Group
  • Mr Karl Sullivan: General Manager Risk - Insurance Council of Australia

ASPI’s Toby Feakin, Director of National Security Programs opened the evening with welcome remarks before passing the floor to chair Paul Barnes. Paul kicked off the discussion with the prescient reminder that on current savings we will have increased frequency of weather-related events (or ‘natural perils’), and noted the need to engage stakeholders across state and local government, the private sector and community levels.

The first speaker, Duncan Bone, indicated that the biggest issue from the retail insurance perspective was sustainability, in the sense of affordability of insurance. He also warned against government involvement as a re-insurer, arguing that this perniciously blunts the price signal which is necessary to force decisions on resilience.

Karl Jones explained the role of the re-insurance industry, and pointed to two areas to deliver improved outcomes on resilience: diversification of risk and measuring risk. He suggested a global standard for reporting risk, encouraging commercial, banking and government sectors to understand their risk to the level of a one in 200 year event. This would provide a tool for cost-benefit analysis that would enable better decision-making around premiums, re-insurance and even policy.

Representing the Actuarial Institute, Tim Clark made the key point that risk is a loose and commonly misunderstood term. The expected cost of a claim is not risk; insurance doesn’t change that. What insurance does is allow holders to transfer actual volatility. He agreed with Bone that risk serve an important function to push mitigation and consumer education.

Karl Sullivan rounded out the discussion with a triangular approach to supporting resilience. The first axis of the triangle is land use planning, which promotes a better understanding of the risks of entailed in developing a specific area of land. The second axis is building codes, which can promote a minimum level of disaster survivability of structures. Finally mitigation efforts, such as construction of levees, can reduce the impact of natural perils. Sullivan reaffirmed that the role of insurance is not to reduce risk, but enables a better understanding of the ultimate effect of residual risk.

The evening closed with a Q&A session followed by refreshments and canapés.



Paul Barnes

Dr Paul Barnes is a Senior Fellow and was previously Head of the Risk and Resilience Program at ASPI.