Some of the risk and insurance sector’s leading voices met online to discuss the rising threat of climate risks and how to tackle the issue in New Zealand.
Research firm CoreLogic hosted a virtual event, ‘Moving ahead on climate change: tackling risks in financial services’, to discuss how the financial sector can assess and manage climate risks.
Milena Malev, CoreLogic GM of Financial Services & Insurance Solutions, said: “Climate hazards present systemic risks to the economy, strategy and governance. The increase in severity and frequency of natural disasters is no longer temporary, it’s close to permanent.
“There was consensus across our panel that cross-sectoral collaboration will be key to effective management of the impact of climate change. Responsibility is shared. The flow of information between different collaborative parties, between research and scientific communities, industry including banking, insurance and investment, government and regulators, and even consumers, is what’s important,” Malev said.
The panel acknowledged that there were actions businesses can start taking to understand their risk exposure, including looking at the possible impact of climate change on real assets and portfolios down to the property level or at a less granular level, at postcode level.
“The panel acknowledged while there’s still some work to be done in transition risk and modelling compound events, tools, software systems and data is already available and being most effectively utilised by the insurance and reinsurance sector. Now is the time for bankers and investors to follow suit.
“Many different outcomes can be achieved with the data; not just assessing a loan, but also to help comply with regulations, conduct portfolio stress-testing and follow it through time and ultimately, connect with customers to ensure their awareness of the risk exposure of their property or physical asset.
“For example, Munich Re’s knowledge of natural hazards combined with CoreLogic’s rich property data and attributes is bringing the evaluation of property risks to life, enabling the industry to start evaluating the impact of climate change on their physical assets and portfolios in a very real, accurate and practical manor,” Malev said.
The panel agreed both Australia and New Zealand governments and financial sectors had made decent progress on the topic.
Malev said: “This is very encouraging and positive. It’s accepted by the industry that more needs to be done to integrate the discussion between government, regulators, industry and consumer; becoming more client-centric, understanding the problem but also sharing the knowledge if it exists.
“The community education piece is another important consideration in how we move ahead on climate change. The role should be shared between banks, insurers and customers. Transparency between these three parties will provide stability for everybody.”
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