It’s difficult to argue that we’re feeling the impacts of climate-related risks and liabilities across all sectors of the insurance industry. However, we are also seeing many opportunities industry-wide to innovate and bring new products and solutions to the market.
According to a recent McKinsey article, in the face of the current global climate crisis, insurance is well-poised to create and offer new solutions, such as:
- Insuring the net-zero transition: Businesses, particularly those in high-emissions sectors, are doubling down on efforts to reduce their carbon emissions. One way they are doing this is by transitioning entire operations over to greener power sources, such as solar, wind, and electric. This requires major (and costly) technology investments—and those investments need to be protected and insured.
- Creating new risk-transfer solutions for rising physical risks: As climate-driven weather events continue to wreak havoc, demand for parametric insurance solutions will also rise. As an industry, we will need to take a long, hard look at how we can offer parametric coverage at scale, continue to hone our risk modeling, and promote these products to insureds.
- Providing adaptation and resilience services: As experts in risk management, insurers can offer expertise in how clients mitigate their climate-related risks and minimize losses. This opens up a whole new suite of consultative services for insurance professionals—everything from risk assessments and risk advisory to incentive programs encouraging clients to rebuild with resilience in mind after a major loss.
While these new opportunities to better support insureds are exciting and promising, McKinsey notes that entering this new market won’t necessarily be easy. Many insurers may have gaps in their climate capabilities (such as a lack of historical underwriting data and expertise) to successfully launch these new products and services. Building partnerships both outside and within the insurance industry can fill those gaps by providing additional funding, technologies, data, and expertise.
Read the full McKinsey article to learn more.
As a leading wholesale insurance broker, Jencap is committed to innovation and reimagining what it means to offer exceptional insurance solutions to our agents, so you can support your clients through whatever climate-related challenges lie ahead. Contact us today to speak with one of our specialists. You can read more industry insights here.