How insurers ready for catastrophe

Better business and resilience come with sophisticated innovations: Sustainalytics

Andrew Willis 9 April, 2020 | 1:39AM
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Andrew Willis: It’s safe that say that human development comes with new challenges and evolving risks. With all the volatility and uncertainty in the world today, insurers have their hands full. Providing financial protections against disasters is a complex task – requiring innovative solutions that also align with United Nations development goals..

And what insurance companies are doing to prepare for the next risks aligns well with the interests of ESG investors, especially around building sustainable cities and communities, according to Jean-Francois Obregon and Justin Cheng at Sustainalytics.

To understand how these insurers prepare, Sustainalytics looked at risks around climate change. Insurers refer to these complex, sweeping, and expense dangers as catastrophic risks that demand sophisticated technological and financial solutions.

For instance, technological advancements in artificial intelligence and machine learning help us predict potential of a flood, down to the postal code.

These technological innovations have been improving the efficacy of financial protections and products like ‘catastrophe bonds’ that payout, often faster than other forms of aid, when tragedy strikes. Even more significant perhaps, these technologies are enabling new formsof financial protections, such as ‘resilience bonds’, which can proactively address and incentivize the mitigation of risks that we can now better measure.

Putting a price tag on future events is no easy task, but it’s needed to ensure economic stability.

For Morningstar, I’m Andrew Willis.

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Andrew Willis

Andrew Willis  is Content Editor for Morningstar.ca. Follow him on Twitter @AndrewWillisCDN.

 

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