GC’s Enoizi urges industry to improve “blending” of risk adaptation and risk financing

The industry must focus its solution efforts on risk adaptation in addition to risk financing when it comes to dealing with the effects of climate change, Guy Carpenter’s Julian Enoizi has warned.

The global head of public sector practice at Guy Carpenter told The Insurer TV it was crucial to scale the (re)insurance sector’s impact on climate adaptation and facilitate engagement with projects that require further support.

“The industry has to look at initiatives that are going to actually help with the adaptation to climate change, rather than just simply financing those risks, so blending risk financing and risk adaptation is key,” Enoizi said on the latest Close Quarter episode.

“The industry has got to come up with a systemic solution to what is a systemic risk,” he said.

“We’ve got to look at the solution through a solution lens, as opposed to simply trying to outrun the problem by financing it because there just simply isn't going to be enough money in the industry to insure every single risk. So, we've got to come up with innovative products, to adapt to the risk as well as finance it,” he added.

At the COP 27 conference in Sharm El-Sheikh in November last year, Marsh McLennan unveiled a new partnership aimed at mobilising support for insurance-based climate adaptation projects as part of the UN’s Race to Resilience global campaign.

In an adjoining report, 17 projects were highlighted, including several projects directly involving Marsh McLennan, including a pilot for a community-based catastrophe insurance model for vulnerable populations in New York City, a blended capital funding structure in Santiago, Chile, and integrated disaster risk reduction and microinsurance programs in Mexico and India.

Importantly, the report calls for the financial services and insurance industries to “move away from simply climate mitigation” and the urgency is clear.

“Less talk and more action was definitely the theme at COP 27,” said Enoizi. “I think what struck me a lot was, you actually meet people at those events who are struggling now, not struggling in 2050.”

He added: “We’ve got to be thinking more about, how do we actually move to adapting to a warmer society rising sea levels? And what can the insurance industry specifically do to promote that, to incentivize that and to help communities - specifically four billion vulnerable people living in communities that are going to be massively affected by climate change over the coming years?”

For Enoizi, who is well-positioned to drive solutions for complex and systemic risks forward from his time as CEO of government-backed terrorism reinsurer Pool Re, the solution is clear: the industry must look to products which incentivise and finance pre-event adaptation, in addition to post-event loss.

He states that the real opportunity lies in shifting the dynamic to spend more on mitigation than we do today, where currently “90% of what we pay out is paid out in post disaster claims.

Collaboration key

Collaboration between the public and private sectors, of course, will be an essential component.

While reflecting on what makes a successful partnership, Enoizi said the industry must listen to the policy objectives of governments and “design solutions that give an equitable sharing of risk between the public sector and the private sector”.

“Ultimately, I think we've got to accept that the purpose of the private sector is to de-risk government and the taxpayer, and put more risk into the private sector, to the ability that we're able to sustain it,” said Enoizi.

“And we're going to have to make sure that over time, we are constantly moving towards a situation where that risk is reassumed by us. So, as we get more comfortable with the risk, as we learn more about it we're able, therefore, to deploy more capital to it.”

Industry’s societal purpose will attract good talent

Enoizi concluded that presenting the industry’s collective purpose as an important tool for societal resilience against the issues facing the world is a “noble purpose” which should, when properly articulated, attract talent to the industry in droves.

Climate change, in particular, is an issue known to resonate with Gen Z, and he believes that in properly presenting insurance as the “purpose driven industry” it is.

By highlighting initiatives, such as the ones that have already been referenced and Resilience UK which are at the forefront of tackling such issues, the industry will be able to attract the talent it so desperately needs.

Watch the 18-minute video with Guy Carpenter’s Julian Enoizi for more on:

  • The goals of the UN’s Race to Resilience initiative and where insurance fits in
  • What the industry could be doing better at in terms of increasing its footprint in building a more resilient society
  • The relationship between the industry and government
  • Possible partnerships between the industry and government around a potential pandemic, climate or cyber solution