Martin Gansneder: We shape strategies for different Allianz markets and advise the OEs on what kind of green products they can offer to their customers. Here, we concentrate on energy efficiency, adaptation to climate change, carbon emissions, and offsets. Depending on the market, we have different possibilities. Sometimes we can connect insurance with banking and asset management.
Adapting to new risks
What does the Allianz Center of Competence for Climate Change do?
We also look at the needs of our customers, and develop products that help them solve their problems. Are they afraid of rising energy prices? Are they afraid of damage they cannot cover with conventional products? Then we help them find the right approach to the problem.
Martin Gansneder: "Green products are profitable"
Why should an insurance company think about climate change adaptation?
Gansneder: We are affected through higher claims, especially in the property insurance, and the variability of these claims is also rising. We could simply adapt our underwriting policies and pricing models, but that would mean that some customers could not afford insurance any more. So, it is in our interest to offer our customers ways to adapt to climate change, avoid excessive losses, and even participate in mitigating climate change.
How do you help consumers mitigate and adapt to climate change?
Gansneder: First of all, we give them the possibility to improve their energy efficiency and save money. This also helps protect the environment, because less carbon dioxide is emitted. In Germany, Allianz offers an Energy-ID program, which includes consulting, finance, and assistance to improve the energy efficiency of homes and offices.
We also support adaptation to climate change. Even traditional storm insurance covers against certain impacts of climate change, but it would be certainly greenwashing to offer it as a climate change product. We must go further and cover new risks like changing weather patterns. Many customers sometimes face a very warm winter one year and a very cold winter the next. With weather derivates, we can protect them against these changing whether phenomena.
Finally, we offer consultation on carbon offsets and trading for those carbon dioxide emissions that cannot be avoided. Our ECOmotion product, for example, offsets the emissions from cars. We also insure these offsets. With Allianz Global Corporate and Specialty, we offer traditional property insurance that covers business interruption and also the loss of income from missing emissions reductions certificates produced under the Kyoto Protocol framework.
That sounds complicated. Can you give us an example?
Gansneder: Take a customer who is running a wind park in India and buys a policy to cover against technical problems. We can also offer him a hedge against changing prices for his emission certificates. If a wind turbine breaks down, we pay him for the lost certificates.
These certificates may only make up about ten percent of his total income, but they are very important for the business plan. Investors can often only run such an investment with the extra revenue from the certificates for every kilowatt hour of renewable energy produced. And if an investor has insurance that covers the loss of certificates, it is much easier for him to raise money for new projects. So insurance also helps to produce more renewable energy.
Allianz also offers weather derivatives. What are these and how do they work?
Gansneder: Normally you use derivates if you have a risk with high probability and small losses. Compared to this, insurance normally covers risks like a fire that doesn't occur often, but have drastic effects, like the total loss of your property.
We use weather derivatives to protect our customers against certain effects of climate change. Our colleagues in Russia are building a weather-index-based agricultural derivatives that protect farmers against loss of earnings through heavy rainfall or hailstorms that destroy their harvest. This allows farmers to get a loan on their future harvest and invest in seeds and machines, because the creditor can be sure that the farmer will have a fixed income.
These are interesting new products, but you also consult traditional insurance businesses. What can you offer them?
Gansneder: We aim to transfer existing products to new markets. We are trying to introduce the ECOmotion insurance from the German market to Fireman's Fund and the U.S. market, for example. We provide them with all the information Allianz Germany has already collected, and help them implement the product very quickly, so they don't have to reinvent the wheel. On the other hand, we try to transfer the green building insurance developed by Fireman's Fund to other markets.
Of course, most markets are different. Green car insurance that offers customers used spare parts works well in the United Kingdom, but is a very sensitive topic in Germany where people are not used to the idea.
I would be very happy if more Allianz companies would adapt climate and ecological products. Green products, of course, are not large-scale in the beginning, but they are profitable, and we can help our customers reduce their carbon emissions and participate in the global effort to slow down global warming.
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