Ekhosuehi Iyahen, secretary general of the Insurance Development Forum (IDF), believes insurers can play a prominent leadership role at the COP26 climate talks in Glasgow this November

Ekhosuehi Iyahen – COP26

Iyahen said the emergence of a clear policy signal from governments has created an opportunity for the industry to step up and showcase the role its tools can play in building societal resilience.

She told The ESG Insurer the COP26 talks provide an opportunity for insurers to apply and enhance their existing risk metrics and management tools to support the climate transition process and help to drive resilience.  

“This will require expanding the toolbox with innovative solutions to support the aspiration we all have for a well-managed and just transition,” Iyahen said. 

Over the past month there have been further indicators of the building policy agenda around climate action, most notably in the US through President Joe Biden’s executive order on Climate-Related Financial Risk.

“This is a tremendous opportunity for the industry to step up and demonstrate how its core tools are relevant at this time,” she said. 

“Risk management is at the core of what the insurance industry does and can help to translate some of the very clear and strong political signals emerging around the urgent need to address climate change into practical solutions. 

“Some of the risks we are seeing will require deeper levels of public-private collaboration to drive more robust local, global risk management architecture.”

The IDF was officially launched at the COP21 Paris climate talks in 2015 and serves as a public-private partnership seeking to extend the use of insurance to build societal resilience.

Iyahen was appointed as the IDF’s first secretary general in 2018, and the following year the forum entered a partnership with the UN Development Programme and the German Federal Ministry for Economic Cooperation and Development (BMZ) which aims to introduce risk management solutions to benefit 500 million individuals by 2025. 

The fruits of that partnership have been seen with the announcement of two projects over the past year, working alongside the insurance sector.

The first project under the Tripartite Agreement – to design an insurance program for Peru’s public schools – was launched last September to be delivered by a consortium including Axa XL, Munich Re, the Peruvian Association of Insurance Companies, risk modellers GEM Foundation and JBA Risk Management and insurtech Picsure.

And the second was unveiled in May, with Hannover Re and Willis Towers Watson working together to develop a parametric flood and earthquake product as well as indemnity landslide protection for the city of Medellín in Colombia.

Iyahen said other projects are in development, including one to reach small farmers in Mexico as well as flood risk projects in Nigeria and Ghana.

“Beyond this, we have also embarked on an ambitious risk modelling agenda with the hope of announcing a major initiative at COP26,” she said.

“There is a need for a common set of metrics that enables consistent international comparison of risks, regardless of territory or peril. 

“Such standard financial metrics, such as annual average loss and probable maximum loss, are useful to international finance institutions including development banks, investors and asset managers. At sovereign level such metrics are a helpful start point from which more locally tailored risk analyses can be developed. 

“There is a need for a common set of metrics that enables consistent international comparison of risks, regardless of territory or peril.

Ekhosuehi Iyahen, secretary general of the Insurance Development Forum

“Similarly, there is a need to actively invest in capacity building programmes to accelerate risk insight to build resilient finance and risk capacity across public and private sectors, for the benefit of the countries and communities that need it the most. 

“We are working actively with partners and with the support of the COP26 private finance team to launch this endeavour.” 

Increasing Awareness 

Governments are increasingly open to the role insurance can play in helping build resilience against disasters, Iyahen said, based on her experiences of working with developing countries.

“Prior to the pandemic, there was some awareness but not a full acknowledgment of the scale or magnitude of some of the risks being faced and in turn a less-than-proactive approach in terms of risk management,” she said. 

“These positions are of course the result of a number of factors, including difficult economic contexts and trade-offs that are often made and should not be taken simply as a lack of ambition or desire to act.”

However, she said the experience of Covid-19 had raised the importance of proactive risk management out of sheer necessity.

“I am witnessing greater interest in exploring ways in which they can better understand these risks and ultimately build greater resilience,” she said.