The Future of Insurance: Chips Off the Old Block or the Dawn of a New Era?
Hold onto your umbrellas, folks! With the way climate change is throwing more natural disasters at us than a weather-obsessed quiz show, it’s clear that insurers are going to need more than just a raincoat and a set of dice. The traditional method of crunching numbers based on incidents of the past? Well, that’s going to need a little sprucing up—like a dentist giving a long overdue makeover with a chainsaw.
Simon Blaquière, over at Generali, lets us in on the old-school way insurance folks do their thing: they look back at history, whip out the statistics, and then, voilà, there’s your premium! But Simon’s shaking his head, saying that just won’t cut it when the world seems to be auditioning for a disaster movie that just won’t end. He’s calling for a revolution, folks—a renaissance of sorts in the realm of risk management!
Frédéric de Courtois from Axa has a term for it: “poly-crises.” Now, that sounds like a health condition or something you’d hear at a middle-aged crisis support group. And he’s not wrong! We are living in a time where crises are as common as bad Netflix original movies. De Courtois argues that the insurance sector must invest in a smorgasbord of new skills—meteorologists, sociologists, and dare I say it, experts in ‘other fields’ that may or may not include pun-making.
Meet the New Insurers: A Whopping Blend of Science and… Humanity?
Generali’s response has been pretty proactive, setting up the Generali Climate Lab back in 2015. Picture a bunch of meteorologists, data scientists, hydrologists, and possibly a philosopher or two sitting around trying to predict the next big weather blow-up—like a psychic reading but for storms! Blaquière describes it as a bandwagon of intellectuals who add a pinch of real science into the actuarial stew—because nothing screams “I’ve got this covered!” quite like having a cartographer that knows exactly where your roof flew off.
Meanwhile, in Germany, Munich Re is hosting its own meteorologist extravaganza, having hired its first one way back in ’74. You have to admire their commitment—who needs sports teams when you can gather a crew of bright minds who classify everything from volcanic eruptions to landslides like they’re sorting Pokémon cards? From volcanic eruptions to hurricanes, these folks are the bouncers of the disaster club, gauging which threats get a VIP pass…and which get sent to the back of the line.
But what’s the bottom line here? There’s a term we like to throw around in the insurance industry: pricing risks. Sounds like someone’s getting ready to go on a shopping spree, right? According to Tobias Grimm, the climate expert bard from Munich, they assess natural disaster risks and use that to determine how much protection will cost you, my dear potential policyholder. And yes, they promise to do this with the utmost accuracy—because nobody wants to be quoted the “hurricane special” rate during a season where everything else is on clearance!
The Power of Collaboration
The actuaries are still the backbone of the industry, but de Courtois emphasizes that collaboration is key. In a world that’s changing faster than a magician at a children’s party, pooling expertise is essential. Imagine a roundtable with different experts clashing over climate data while trying to predict doom and gloom—sounds like a riveting film concept, doesn’t it?
Moreover, Axa has its own research fund, promising to keep insurers a step ahead of the game by collaborating with universities and researchers. Just think about it: academic research brought into the glamorous (ahem) world of insurance—what a twist! What’s next? An insurance company sponsoring a scientific study on the best way to dodge incoming asteroids? We can only hope!
Over at Generali, they’re even hosting three doctoral students straight out of some high-end think tank, focusing on specifics like drought and storm impact. If that doesn’t scream “we’re here to prep for the end of days,” then I don’t know what does!
As we barrel down this uncharted path of climate unpredictability, let’s raise a glass—filled with whatever crazy cocktail concoction these insurers are whipping up—to the future of insurance. One that may finally leave behind the dusty old ledgers of yore and stride proudly into a world where skiing on the slopes of data is just as thrilling as, well, ski diving into a hurricane. Cheers!
Faced with the increase in natural disasters caused by climate change, insurers must change their working methods and no longer just analyze past events, but find new skills in the face of the unknown.
“The classic insurer’s approach is to produce statistics, to look at what happened in the past, on these losses that we have compensated, and to reproduce that in the future,” explains Simon Blaquière. , director of reinsurance, natural risks and technical projects at Generali.
Insurers employ actuaries who use mathematics, statistics and data to model the future in ways that help companies manage the financial impact of the risks they insure.
“The role of the insurer has always historically been to rely on the past, that is to say on history, on data and that obviously remains important. But today, the changes are such that we must look to the future and try to predict,” explains Frédéric de Courtois, deputy general manager of the French insurer Axa.
For him, “we live in a world of poly-crises”, that is to say “both the multiplication of crises and the fact that these crises are correlated”. To answer this, one of the solutions is to “invest ever more in human capital and new skills: with meteorologists, with sociologists, with experts in different fields”.
The Italian insurer Generali, for its part, created the Generali Climate Lab in France in 2015 with the objective “to better control, to better understand, to better analyze, to better prevent climate issues”, explains Simon Blaquière, who also directs this laboratory.
This has a multidisciplinary team of around ten people, among whom “you will find the classic functions of insurance with actuaries, +data scientists+ to process the data”, but also “much more scientific profiles on climate sciences: hydrologists, hydraulic engineers, cartographers“, even people who have studied political sciences, “who were able to work in administrations”, according to Mr. Blaquière.
Pricing risks
German reinsurer Munich Re, which insures insurers, “hired its first meteorologist in 1974, and the company today employs about 30 experts, segmented by type of risk, such as storms, earthquakes and other natural disasters “, explains Tobias Grimm, climate expert at the reinsurer.
“My job, along with my colleagues, is to assess the risks associated with natural disasters around the world,” he explains.
In effect, this means that “we put a price on these risks – whether it’s a volcanic eruption, a landslide, a drought, or a hurricane. We must classify and quantifying these risks. This forms the basis for actuaries, who integrate this information into risk models, and this will ultimately determine the price that the client sees in their contract,” adds Mr. Grimm.
Because “not only are these new skills important and for us it is important to be able to recruit them, but the collaboration between these different skills is (a) key element”, indicates Mr. de Courtois.
The actuary remains very important, but what is even more important “is to bring everyone around the table to be able to analyze and have a prospective vision”, adds the deputy CEO of Axa.
Insurers and reinsurers also rely on academic research.
The Axa Research Fund “also allows us to have access to the latest innovations, to the work of universities and researchers and to understand how these risks will evolve, how our profession will change,” recalls Mr. de Courtois.
Within Munich Re too, “we of course work in close collaboration with the academic world,” assures Mr. Grimm. “Many universities, doctoral students and professors are looking at different aspects of natural disasters. We are in contact with many of them, collaborating on research projects and integrating this knowledge into our models,” he continues.
The Generali Climate Lab welcomes three doctoral students working respectively on drought, the impact of storms, and hail modeling.
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