Understanding the impact of climate change is a big component of providing protection in exposed areas, according to Kevin O’Donnell, president and CEO of Renaissance Re.
Speaking at the ‘Climate and Environment Change’ panel at the 2018 Bermuda Captive Conference, O’Donnell explained: “Our business is providing protection in exposed areas and we need to understand how the events of the past would be different today.”
“A big component of understanding that change is what is the impact of climate change.”
O’Donnell added: “The way we build our risk distribution and think about pricing risk is build models that represent the physics of extreme events. Those models then are altered by our observation of weather and weather is influenced by climate change.”
“So it all fits together, in us thinking about what is happening today in the context of what is happening over the longer term.”
“If we look at the data we can certainly see a rise in temperatures and one can argue what the effects of this are, I happen to agree that it is going to increase the severity of large events and probably the water intensity of those events as well.”
According to O’Donnell the events of 2017, which was one of the worst years on record for insured natural catastrophe losses, represented a potential opportunity for the captive industry.
He said: “Looking specifically at 2017, there was $330 billion of losses and only about $130 billion of that was insured.”
“So what that represents is an opportunity for us as an industry to think about ways we can protect people's lives more wholesomely, that can be through resilience, through new products, better coverage.”