Ethiopia is a country prone to many climate risks, which particularly affect its majority rural population. To manage these agriculture-related climate risks, Ethiopian farmers respond by spending their savings, selling valuable assets at heavy discounts, and reducing consumption.
Until recently, insurers barely had any footprint in rural areas with smallholder farmers. In fact, 2014 data shows that less than 2% of Ethiopians were covered by any type of formal microinsurance product. Because insurance is an ex-post tool and not all risks are insurable, a holistic approach to dealing with climate risks is needed to help vulnerable communities become more resilient.
In this article, Milliman’s Mariah Mateo Sarpong and Mebrahtu Brhan Gebre present an example of a holistic risk management solution that the MicroInsurance Centre at Milliman developed for smallholder farmers in northern Ethiopia. The product illustrates Milliman’s Climate Resilience Initiative’s holistic approach to enhancing climate resilience in low-income communities.
As the 2020 wildfire season again exceeds historical norms, insurers and policymakers must turn their attention from the literal fires to the figurative one: the threat—and increasing likelihood—that this escalating wildfire risk will result in a homeowners insurance crisis in the state of California.
For homeowners, insurance is often the last line of defense against losing everything to wildfire. However, for many, this crucial financial backstop is rapidly becoming harder to obtain as insurers reduce their portfolios due to billions in losses and regulatory restrictions on reflecting the true cost of risk in the premiums charged. This withdrawal is creating an untenable situation for many Californians and efforts to address it are becoming an urgent priority for policy makers.
In this article, Milliman professionals explain in more detail the state of home insurance in California and the regulatory efforts to address the issues thus far.
Climate change is one of a number of interconnected risks threatening the stability of the global financial system. This year, for the first time, the World Economic Forum ranked it as the top challenge facing humanity. This issue has not gone away amid COVID-19, which has exposed how actions in one country can have direct consequences for the whole world.
In this article, Milliman’s Neil Cantle and Nancy Watkins, along with The Oracle Partnership’s Peter Kingsley, discuss the role actuaries and insurers can play in tackling climate change following the coronavirus crisis.
Financial services firms are focusing on risks associated with climate change more than ever now. In part, the heightened attention results from increased regulatory activity in this area.
Firms are now required to evaluate the potential financial impact of climate change and include climate change considerations within their risk management frameworks.
A typical risk framework is anchored around the risk appetite associated with a firm’s key objectives. Milliman consultant Neil Cantle provides more perspective in his article “Look, learn, predict.”
In March, the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) hosted the first meeting of the jointly established Climate Financial Risk Forum (CFRF). The CFRF was established to build capacity and share best practice across financial regulators and the industry to advance financial sector responses to the financial risks from climate change.
The CFRF produced a guide to help firms understand the risks that arise from climate change and to provide support on how to integrate these risks into strategy and decision-making processes. The CFRF emphasises the importance of greater transparency and consistency regarding firms’ disclosures of climate-related financial risks, the benefits of effective risk management and scenario analysis and the opportunities for innovation in the interest of consumers.
The forum set up four working groups to explore the risks that climate change poses in each of these areas and developed practical guidance. In this paper, Milliman’s Amy Nicholson and Sophie Smyth summarise the key guidance from each of these four working groups.
The European Insurance and Occupational Pensions Authority (EIOPA), the G20-supported Task Force on Climate-related Financial Disclosures and the United Kingdom’s Prudential Regulation Authority (PRA) have all published various papers and statements aiming to encourage companies to disclose the impact of climate change on their business. The emphasis is felt across the board with regulators aiming to ensure that both firms and individuals are able to take into account the risks of climate change when making financial decisions. In this paper, Milliman professionals explore what metrics are most useful to insurance companies when considering the risks and effects of climate change.