Insurance is a fundamental tool for managing risks, improving resiliency after disaster events, and opening up economic opportunities that otherwise may not be possible. Yet, not all risks are insurable. Society has struggled in the past with risks that are highly correlated among insureds, as is the case with natural disaster events, or where losses could be so severe as to be unmanageable by the private insurance market because they could threaten the solvency of companies, as would be the case with a nuclear accident.
Recently, the twin forces of climate change, altering weather patterns around the globe, and globalization, in terms of increased migration, interconnected supply chains, and rapidly changing technologies, have raised the question as to whether disaster events are becoming increasingly uninsurable. Exposure is concentrating as development in risky areas continues, and systems previously thought independent are becoming linked, whether due to relationships in the climate system, deployment of the same vulnerable technology, or reliance on a single supplier. These trends are leading to ever-increasing disaster losses worldwide.
Panelists at this RFF seminar addressed the following questions:
- Do climate change, increased mobility, urbanization, and rapidly changing technologies and other worldwide trends pose any problems for (re)insurance markets?
- Can we invest in hazard mitigation, such as fortifying homes against hurricanes or altering land use in hazardous areas, aimed specifically at improving insurability?
- What new risk management tools are emerging? Do financial instruments, such as catastrophe bonds, show promise for addressing these challenges?
- What is the government’s role in managing hard-to-insure risks?
Carolyn Kousky, Fellow, Resources for the Future
Andrew Castaldi, Senior Vice President and Head of Catastrophe Perils, Americas, Swiss Re
Roger Cooke, Senior Fellow and Chauncey Starr Chair in Risk Analysis, Resources for the Future
Bob Kopp, Associate Director, Rutgers Energy Institute, and Assistant Professor, Department of Earth and Planetary Sciences, Rutgers University
Bob Litterman, Partner and Chairman, Risk Committee, Kepos Capital
Peter Nakada, Managing Director of Risk Markets, Risk Management Solutions, Inc.