Chairman, Willis Research Network
Australian rugby legend Michael Hawker, who by that time was running the major underwriter IAG, once described insurance as the 'ultimate community product'. Over a decade later, as I sat in a converted Berlin gasometer supporting German G7 proposals to extend climate risk insurance to 400 million people by 2020, those words chimed loudly.
Insurance is the big new idea. It's been around for ages but we've forgotten all about it. That's about to change. In June 2015, the UN Secretary General, Ban Ki-moon opened the first ever UN Insurance Sector Summit in New York, in recognition of the central role that insurance will play in delivering climate security, long-term investment and sustainable development for all.
From weather risk to health, from the smallest microinsurance customer to the largest corporate client, insurance creates an inspiring international support system. It provides a way to manage and share risk between populations at local and global scales, via public, private and mutual mechanisms, enabling us to care for one another and thereby underpin our human dignity.
Supporting and nurturing human dignity and meaningful human lives is at the heart of inclusive capitalism. The risksharing that insurance brings is essential to this. But, even more important perhaps, is the detailed and sophisticated understanding and management of climate and seismic risk that the insurance sector has developed over time.
We face unprecedented levels of natural disaster risk, mostly, but not entirely, due to our increasing exposure to climaterelated extremes. This will increase. Much of this risk is not factored into either corporate or investment decision-making. For this current and future risk to be adequately managed - and for capital to flow in ways that will ensure resilience - it must first be adequately evaluated and accounted.
As a way of ensuring their own resilience to climate and disaster risks, re/insurers have developed sophisticated models for managing natural catastrophe risk. For almost a quarter of a century these have also been used by insurance regulators, auditors, credit rating agencies and investment analysts to ascertain and verify that insurers are secure and can keep their promises.
If these tools and protocols were shared throughout the economy, it is our belief that corporate and investment behaviour would change significantly and become much more risk-aware and supportive of a long-term, sustainable future for all.
Capitalism would become more inclusive, efficient and aligned with protecting the basic human rights of life, livelihood and shelter against the growing threats we face.