The climate crisis is getting worse: here’s how insurance is helping

Pierre du Rostu, CEO of Axa’s digital commercial platform, on the role insurers can play in addressing climate change.

As I write, soldiers, emergency workers and volunteers are scrambling to shore up defences around Wrocław, Poland’s third-biggest city, to protect it from flooding. Over the past five days, more than five times the average rainfall for the whole of September has fallen across Poland, Austria, Czechia, Hungary, Romania and Slovakia, causing floods that have so far killed 23 people in four countries.

In Portugal, meanwhile, the government has declared a ‘state of calamity’, prompted by the outbreak of dozens of wildfires which continue to burn across northern parts of the country. They have killed at least seven people, reduced dozens of houses to ash, and torn through tens of thousands of hectares of forest and scrubland.

In Strasbourg, the EU’s crisis management commissioner, Janez Lenarčič, put it this way: “Make no mistake. This tragedy is not an anomaly. This is fast becoming the norm for our shared future. Europe is the fastest-warming continent globally and is particularly vulnerable to extreme weather events.” In other words: this is climate breakdown in action.

It’s fitting that this is taking place on the eve of Climate Week in NYC. The theme of the event is ‘It’s Time’. The implication is clear: we’ve talked and talked. We’ve made countless promises. We’ve signed pledges. We’ve struck deals. But still the planet gets hotter. The climate crisis continues. The temperature stayed at 1.5°C above the pre-industrial era average for 12 consecutive months, it was reported in summer. We need to act.

And insurance is responding. Thanks to advances in our ability to gather high-quality data and to make that raw data intelligible through expertise and software, we’re able to understand what is happening worldwide in respect of climate events with more accuracy, and in a more timely way, than ever before.

Public and private satellites orbiting the Earth capture terabytes of raw imagery which is sent to private software companies operating bleeding-edge AI-powered geoanalytics software. This software then translates that data, much of which is otherwise unusable, into something that can be understood.

What does this mean practically for insurance? For the first time, by forming partnerships with climate intelligence companies like these, and integrating their technology into a platform, insurers can move from a response model to a predict-and-prevent model.

This is transformational. Insurance, historically, has existed to pick up the pieces, so to speak, after an unfortunate event, and help individuals and organisations to recoup their losses insofar as they can be recouped.

Let me be more specific. Wildfires of the kind we’re now seeing in Portugal also afflict Greece, France, the west coast of America, and many other places, causing extraordinary damage. There are even parts of Wales – a country not known for its extreme heat – where the likelihood of fire has climbed above 15 percent. Extreme heatwaves anywhere are statistically four times more likely than they were 150 years ago. The average wildfire season is three times longer than it has been in recent decades. The 2020 US wildfire season alone caused over $16bn in damages, and that number is likely to rise as fires grow in frequency and intensity.

Insurers can integrate geospatial data on a range of natural disasters, including wildfires, provided by climate intelligence companies using Earth observation technology, and empower their clients worldwide. Their agents can advise clients on why their assets are vulnerable and how to reduce their risk.

They can give their clients access to a dashboard that updates itself automatically and in real time according to what the latest and best available geospatial data says about wildfires, say, or floods, or another form of natural catastrophe in their area. They can inform them of the ‘next-best action’, prioritising the things they should do, and give them access to a range of third-party services to limit their exposure. Such a system can even warn those clients if an event is about to break out, so they can take either preventative or evasive action.

The insurer thus becomes the conductor of a whole orchestra of companies that provide risk management services. This is very new.

The other side of this is response. Armed with Earth observation data, insurance companies can gauge with pinpoint accuracy the spread of the natural disaster and the damage it has caused. That makes the whole process of making insurance claims infinitely more efficient, for the claimant and the company, and infinitely less emotionally draining.

Insurance can still help to pick up the pieces after a disaster, but it can also stop that disaster happening in the first place, or dramatically lessen its impact.

Insurance, sometimes wrongly seen as a conservative sector that only steps in after people have suffered, is increasingly showing itself to be forward-thinking, technologically savvy and ready to play the important societal role that it always has.

At a time of polycrisis, when risks are intersecting and interlocking, a yawning protection gap has emerged. But armed with geospatial data, drawn from satellites and processed by Earth observation technology, insurers can help their clients understand their risk of wildfire, flood, or other natural hazard, help them prevent disaster, and help them respond well.

They can, in other words, close the protection gap and give them peace of mind.

Pierre du Rostu is CEO of Axa’s digital commercial platform.