Navigating the storm: How can insurers better prepare for the impact of climate change

Abstract

Climate change is forever changing the risk environment for insurers and their customers. A recent example of this is the intense storm witnessed by the people of Bahrain and around the region on the eve of 16th April, 2024. There were minimal preparations made by either insurers or their customers, resulting in severe disruptions to daily life and property damage. To mitigate this, insurers need risk management programmes that move beyond traditional solutions to deal with climate change. These risk management solutions must be varied to cover all aspects of an insurance operation and provide customer value. Solutions can be focused on changing policy cover terms, new product development, altered investment strategies, use of technology and innovation, and engagement with the public. There are challenges, however, such as the availability and credibility of data, affordability and social equity, uncertain regulations and rising costs. Yet, the consequences of not acting on climate change will be higher for insurers eventually.