📋 Video Summary

🎯 Overview

This video is the second class of a special topics course on international reinsurance, hosted by Bermuda College, discussing climate change, sustainability, and partnerships within the reinsurance industry. The presentation, given by Angela Arazari from Renaissance Re, covers current climate trends, risk management strategies, and collaborative efforts to address climate-related challenges.

📌 Main Topic

Climate Change, Sustainability, and Partnerships in Reinsurance

🔑 Key Points

• 1.Introduction & Course Overview [0:00:04]

- The video is part of a course on international reinsurance, with a focus on climate change this week.

- The course is a collaboration between Bermuda College, St. John's University, and the Bermuda Foundation for Insurance Studies.

• 2.Chatham House Rule & Course Details [0:00:46]

- The session follows Chatham House rules, meaning participants can use the information but not reveal identities or affiliations.

- Contact information is provided for those seeking more information.

• 3.RenaissanceRe's Purpose & Climate Focus [0:07:32]

- RenaissanceRe (RenRe) was founded after Hurricane Andrew in 1993.

- RenRe's purpose is to protect communities and enable prosperity. - They employ advanced scientists to understand and address climate risks.

• 4.Current and Projected Climate Trends [0:09:57]

- Global average temperatures are increasing, with 2023 and 2024 being the hottest years on record.

- The Paris Agreement aimed to keep warming below 1.5°C; however, it's considered unobtainable. The new goal is 2°C. - Projections from the IPCC indicate potential temperature increases of 4-4.5°C by the end of the century if current trends continue. - Sea ice is decreasing in the Arctic, contributing to sea level rise.

• 5.Managing Climate-Related Risks [0:19:52]

- The impacts of climate change on extreme weather events are significant.

- Historical data alone is insufficient; current climate states must be incorporated into risk modeling. - Meteorological models are being developed to assess risks, considering historical data, climate science, and physical understanding.

• 6.Specific Risks: Hurricanes [0:23:04]

- Hurricane risk is increasing due to warming oceans, resulting in higher storm surge, a greater percentage of major hurricanes, and wetter hurricanes.

- There is no consensus on future hurricane activity.

• 7.Specific Risks: California Wildfires [0:30:34]

- California is experiencing hotter, drier conditions, with the largest and most destructive wildfires occurring in the past two decades.

- Wildland-urban interface expansion increases wildfire exposure. - The lengthening dry season and high winds are contributing to the problem.

• 8.Specific Risks: US Severe Convective Storms [0:39:59]

- Severe convective storms (tornadoes, hail, derechos) are increasing in frequency across the US.

• 9.Exposures and the Protection Gap [0:44:50]

- Urbanization and population shifts are increasing climate-related exposures.

- Global natural catastrophe insured losses have doubled relative to GDP over the past 30 years. - The protection gap (uninsured losses) is significant, with 59% of global losses uninsured. Loss of insurance coverage has a detrimental impact on communities.

• 10.Partnerships & Risk Mitigation [0:51:30]

- The Insurance Development Forum (IDF) aims to help communities recover from disasters.

- RenRe works with the IDF, focusing on risk modeling and financial resilience in various countries. - The Insurance Institute for Business & Home Safety (IBHS) conducts research to improve building resilience. - IBHS has developed the "Fortified" standards for homes.

• 11.Incorporating Climate Model Uncertainty [1:33:49]

- Reinsurers use data from insurance companies, including building details, location, and financial values.

- Catastrophe models simulate events and calculate expected losses. - Reinsurers adjust models based on their own views, incorporating climate science and mitigation data.

• 12.Legislative and AI Impacts [1:49:09]

- Legislative risks primarily concern the reduction of greenhouse gas emissions.

- AI is expected to play an increasing role in risk assessment, modeling, and claims analysis.

💡 Important Insights

• •Protection Gap: The difference between economic losses and insured losses. [0:48:17]
• •Mitigation's Value: Every $1 spent on risk mitigation can result in an $8 reduction in losses. [1:04:50]
• •Data is Key: The quality of data provided by the insurance companies is critical for reinsurers. [1:32:02]

📖 Notable Examples & Stories

• •IBHS Facility: The facility demonstrates the real-world impacts of hurricanes and wildfires [0:57:00]. They are testing the effectiveness of various building techniques [1:00:00].
• •Hurricane Sally in Alabama: A study showed a 70% decrease in damage in fortified homes compared to non-fortified homes [1:02:09].

🎓 Key Takeaways

• 1.Climate change is significantly impacting the reinsurance industry, increasing risks and costs.
• 2.Partnerships and risk mitigation strategies are crucial for addressing climate-related challenges, including the protection gap.
• 3.Understanding and incorporating climate model uncertainty is essential for accurate underwriting and pricing.

✅ Action Items (if applicable)

□ Review the Smith Warner report on climate change in Bermuda (gov.bm/climate).