The insurance industry should use its technical expertise in pricing risk to convince politicians of the financial impacts associated with climate change, Axis’ chairman said.
Speaking today at a climate risk insurance symposium hosted by the carrier in Champaign, Illinois, Michael Butt said (re)insurers needed to be more proactive in using its risk modelling and pricing expertise to give lawmakers a more accurate understanding the economic losses spurred by climate change.
“We can put a better – much more accurate – price on risk.”
“If we can get politicians to understand the real price of risk and get them to understand that subsidies do not help,” the senior executive said, adding that curtailing government involvement in some schemes may help risks to be priced more accurately.
Butt said the Bermudian reinsurance market could help provide more accurate research into the economic impact of global warming and cited the flurry of investment in catastrophe modelling that began with the launch of the market in the early 1990s.
“It was in 1992 when the industry seriously began to invest in weather modelling because of the lack of good information [about catastrophes].”
“The Bermuda market has been instrumental – partly because of its location – in helping to develop a better understanding of climate risk,” he said.
Butt joined Axis in 2002 and has held a string of senior executive and non-executive roles at carriers including as a director of XL Capital, Farmers Insurance Group and as chairman of Sedgwick Limited.
His comments follow a warning from Munich Re at the industry’s annual Baden-Baden meeting that climate change is causing the risk of extensive wildfires to increase rapidly both in mainland Europe and North America.
Multiple sources speaking to The Insurance Insider’s sister publication Trading Risk have said that potential new third-party investors are challenging the industry on climate change and withholding funds because they do not like the industry’s failure to act.
An earlier version of this article incorrectly described Michael Butt as an Axis co-founder. In fact, he joined the Bermuda carrier in 2002, the year after it was established, joining founding CEO John Charman.