At the G7 summit, heads of state supported the upscaling of climate risk insurance for the poorest and the most vulnerable – expanding insurance cover to an additional 400 million people, presumably in developing countries. You will be attending a meeting at the margins of the UN conference this Wednesday where you’ll exchange views with governments on this mechanism. Can you explain how insurance can help offset the impacts of climate change?
Insurance can help economies recover more rapidly from extreme weather events, and insurers can share expertise, data and early alerts to help prevent major damage. A recent study by the Bank for International Settlement looked at such events over the past 50 years in 200 countries and found that a typical disaster could reduce growth permanently by almost 2%. However, countries with good insurance cover fared a lot better, with only small medium-term effects.
There are successful examples of government-led insurance schemes. For instance, the African Risk Capacity supports African Union countries in better responding to floods and droughts. However, the insurance gap is still huge on the continent and will require a joint effort from the private sector, governments and development agencies – the G7 initiative is a move in the right direction.
What about your customers? Is climate change on their agenda?
Climate change is the number one long-term business risk for industrial customers according to the most recent Allianz Risk Barometer [a survey which compiles the concerns of over 500 corporate risk managers and insurance experts from more than 40 countries].
Business interruption and supply chain losses already account for around 50-70% of all insured property losses, up to as much as USD 26 bn per year (2013 figures). Manufacturing companies faced major disruptions after the floods in Thailand in 2011, bringing the automotive industry in Germany, as well as IT giants in the US to a temporary stop. Infrastructure and businesses in emerging economies are key components of the global economy and will be first impacted by climate change. How to enhance their “resilience” will probably be one of the buzzwords at the conference this week.
What are the barriers to rolling out insurance in Africa?
Probably not very different from the barriers in other emerging economies. There is very simply a lack of experience with the concept and benefits of insurance. Luckily, this is changing as financial systems become more sophisticated, corporates deploy better risk management and private insurance customers become more familiar with the products. Progress is slower on the regulatory side, threatening market stability and customer trust in some regions. Lastly, affordability can be an issue, but we are getting better in tailoring our products to country-specific needs and circumstances.
Let me conclude with a more personal question: what does it take to be a (female) business leader in Africa?
It's is key to remain true to who you are. Without integrity and a strong character to sustain you in the sometimes very ambiguous business environment, you are bound to fail. This applies whether you are a man or a woman in Africa. As a woman though it is important to keep your femininity and all that comes with it. As women we have a different sense of business than men. This is why diversity is essential. Together we are better.