RenRe’s Carr: Industry must create momentum behind climate sustainability or face a “tragedy on the horizon”

RenaissanceRe’s Cathal Carr has stressed the need for increased momentum around climate sustainability, which is essential to create a resilient global market as the (re)insurance industry looks to aid the transition to a green economy.

Speaking to The Insurer TV at RenaissanceRe’s recent Risk Mitigation Leadership Forum, Carr, who heads the reinsurer’s climate and sustainability strategy, reflected on creating opportunity for shareholders while still focusing on environmental and social impacts.

Carr explained that RenaissanceRe has been focusing on transitioning to net zero through its underwriting strategy, also with a view to closing the protection gap.

He recognised that the impacts of global headwinds such as the war in Ukraine, inflation, recession and the recent energy crisis must be addressed immediately.

But although perhaps appearing less pressing than these emergent events, innovating on approaches to tackling climate sustainability is also critical and must have the industry’s attention.

“While other crises are very obvious to us right now, climate sustainability does suffer from the tragedy of the horizon … where the current generation, we’re not necessarily dealing with the true extent of the crisis that will unfold,” he said.

The science on this is clear – as is the evidence of changing weather patterns such as flooding or wildfires – bringing much-needed momentum into this space and, in turn, the necessary sustainability to the market, he added.

In addition, Carr believes modelling will play a crucial role in addressing climate change. Led by its risk sciences team and president Craig Tillman, RenaissanceRe has invested significantly in developing its own view of how climate change impacts risk within its portfolio.

He referenced that since 1990, 30 percent of global cat events have been covered by insurance but this number is much lower when looking at the Global South. Carr said that more needs to be done to close the protection gap, listing three main tactics and tools to do so.

He labelled collaboration as crucial to solving this issue, noting that the industry seems to be aware of this given important groups such as the Insurance Development Forum, ClimateWise and Sustainable Markets Initiative being created to form scalable and applicable solutions for the Global South.

In addition, Carr emphasised the importance of technology, particularly its use in democratising risk through bringing that technology to areas and people who would not have previously had access to such resources, leading to better risk taking decisions and future planning globally.

He also highlighted the need for innovation, thinking of ways to use and develop existing technology. Carr said the potential uses of parametric triggers to close the gap in ways ultimate net loss or indemnity covers may not have previously been able to, or using technology to promote financial inclusion in the distribution of products at the insured level.

In this eight-minute video, Carr discusses:

  • The critical role the industry plays in tackling the immediate global crises and the need for sustainability
  • The work that must be done to create a more resilient global market
  • Collaboration, technology and innovation as the three key tactics