Risks and challenges

The financial services sector is not exempt from the effects of climate change. For example, extreme weather events, and the subsequent multitude of insurance claims, pose a very serious risk for the insurance industry. A “claims contagion”, in which present systems cannot cope with the sheer quantity of work and claims, is a real possibility. Record insurance payments also bring with them the danger of market downgrades and possible lawsuits

Opportunities

While some insurers have taken a hard line and withdrawn high-risk products or increased their premiums, forerunners have created new products that aim to prevent losses by rewarding conduct that prevents loss.
An example of this is insurer FM Global. FM Global implemented insurer-initiated hurricane-loss prevention mechanisms that resulted in the avoidance of $500 million in property losses due to Hurricane Katrina in 2005, with customers investing only $2.5 million. According to FM Global, customers who chose to employ the hurricane-loss recommendations sustained eight-times less property damage and the $500-million saving helped the company to remain profitable in a year in which few insurers were.

What can GCX do for you?

• Adaptation:

Adaptation involves the adjustment of systems in order to respond to actual or expected weather events or their physical manifestation. These adjustments mitigate the harm or exploit the beneficial opportunities that arise from these events. GCX can inform you about the impact that climate change will have on the sectors that you insure. High-risk industries include agriculture, mining, oil and gas, residential properties, transport and travel and tourism. Consequently, you will be able to structure your insurance products according to the physical, legal and reputation risks that they represent, and tailor them to high- and low-risk clients. You can thus add value to your products and you will be able to advise your clients as to how to reduce their, as well as your, climate-change risks.

• Efficiency:

Through determining your carbon footprint and a business-case energy efficiency audit, GXC will assess your company’s carbon emissions and help you to set targets and budgets that suit your business. From here, GCX will help you to implement reductions and achieve your cost-cutting goals, which include education campaigns in your organisation to engrain climate-change awareness in your company’s culture and to ensure that employees support internal initiatives. GCX will also undertake to monitor your emissions on a continuous basis. The journey towards becoming a low-carbon business also offers significant PR and marketing opportunities that can be harnessed to differentiate your company as a climate-change leader.

• Increased competitiveness:

GCX will assist you in identifying new markets, tailored to climate-change risk, so that you can capitalise on this growth segment. It also offers you the opportunity to differentiate yourself as a climate-change leader, create new products, and distinguish your brand in increasingly competitive markets.

• Increased productivity:

GCX offers you the opportunity to have a carbon calculator on your website, which your clients can use. This will enable you to determine their carbon footprint and consequently gain a better understanding of their assets and how they utilise them. You will also be able to gather accurate information on your clients without a strong reliance on the broker.

• Legislation and reputation:

GCX will determine the effect that carbon laws will have on your business and identify the best ways to ensure your continued profitability, which also include establishing the reputation risks posed by being affiliated with a high carbon-emissions business. GCX will assist you in identifying sectors and assets associated with high risks, as well as helping you to develop policy through our extensive industry-based research.