The European Insurance and Occupational Pensions Authority (EIOPA) released a special report on the possible increase in risks that climate change may cause to insurance companies.
In addition to the specific findings of the report itself, the fact that EIOPA went so far as to compile a detailed report on the effects of climate change and how it impacts insurance companies’ operations is an indication that the new environmental conditions, in most cases, have started affecting various productive sectors of the real economy.
The research indicates that insurance companies are particularly concerned about weather phenomena like windstorms, wildfires, and river and seashore floods.
The risk of wildfires has been rising in southern Europe for the last 5-10 years.
In addition to its impact on real estate activities, insurance companies expect a significant increase in their frequency and scale/amplitude will impact agriculture, forests, and commercial and residential properties.
Wildfire risk is already actively monitored, especially in Greece and Cyprus, where insurance companies have increased or plan to increase their insurance premiums and introduce new insurance policy restrictions.
At the same time, Real Estate Management related companies are expected to be affected by river floods.
In Cyprus, we do not have so many rivers. However, in recent years, we have seen, for example, the Pedieos River overflowing and some dried-up rivers “flash flooding” areas of Larnaca and Limassol.
In this context, many insurance companies across Europe report that premiums have increased or are being considered for increase.
This has been done mainly in Italy, Ireland, and Germany, Greece, and Cyprus to a lesser extent.
Insurance companies are also concerned about the increasing intensity of windstorms and the more frequent and prolonged periods of drought, characterised by the lack of rainfall due to global warming.
Let us imagine a start-up technology company automatically collecting data for all properties in each country, creating a separate profile for each property and making it available to insurance companies.
A profile that could provide a thorough risk assessment for insurance industry purposes in seconds.
Literally, at the touch of a button, insurance companies can have a real-time assessment of existing weaknesses affecting a particular area, e.g., proximity to seismic cracks, flood risk, type and depth of rock formations, identification of an area that is vulnerable to wildfires or land displacement, nearby vegetation density.
And the icing on the cake? By pressing the same button, they receive an estimate for the replacement cost of each building.
You can calculate how many person-hours and operating costs a business can save–in our case, an insurance company, if it has such a tool that evaluates all the data out there with automated procedures.
We left the best for last.
What we have mentioned is not a product of science fiction or something that will happen in the distant future.
We are already at an advanced stage with our partners to turn millions of available data into real and reliable information.
We hope the data processing stage will soon be successfully completed.
We will be able to make our contribution so that the data can be used to benefit businesses and society at large.
By Pavlos Loizou, CEO, WIRE