By: Pavlos Loizou, CEO, WIRE
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 such as windstorms, wildfires, and river and seashore floods.
The risk of wildfires has been on the rise in southern Europe for the last 5-10 years. In addition to its impact on real estate activities, insurance companies expect that 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 although in recent years we have seen, for example, River Pedieos 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, to a lesser extent, in Germany, Greece and Cyprus. In addition, insurance companies are also concerned about the increasing intensity of windstorms and the more frequent and prolonged periods of drought, characterized by the lack of rainfall due to global warming.
Technology’s Role
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 will provide a thorough risk assessment for insurance industry purposes in a matter of seconds.
Literally at the touch of a button, insurance companies (and not only) 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, etc. 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 manhours and operating costs a business can save–in our case an insurance company, if it has at its disposal such a tool that evaluates with automated procedures all the data out there.
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 that the data processing stage will soon be successfully completed and we will be able to make our own contribution so that the data can be used for the benefit of businesses and society at large.
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