By Rebecca Delaney

June 24 - (The Insurer) - Howden Group CEO David Howden warned on Monday that “the iceberg is looming” on insurability and climate risk, as he called for insurers to adopt a more holistic approach to risk management and risk transfer.

Delivering a keynote address at the De-Risking Summit at Mansion House as part of London Climate Action Week, Howden said the concept of insurability (the capacity to secure insurance and the signals sent to markets about the nature of risk) had “laid the foundation of the modern world”. He cited examples such as safety standards for steam boilers in the industrial revolution and current cyber hygiene practices.

“But the headway we made in one direction over the past three-and-a-half centuries is now being threatened by headwinds in another, most notably by climate change,” said Howden.

He pointed to the proliferation of secondary peril weather events, including hailstorms in Germany, flooding in the UAE and Oman, and severe convective storm activity across the U.S, while the first-quarter Los Angeles wildfires in particular highlighted the growing protection gap.

“Difficulty of raising premiums and assumptions that the government will cover risk have made the business model of insurers unviable, leading them to pull coverage from high-risk areas. That feeds through to the customers,” Howden said.

“We're in the midst of an insurability crisis. For too long we've taken insurance for granted. That's why we're here today.”

To mark the beginning of London Climate Action Week, on Monday Howden Group published a report calling for the adoption of insurability as a basis for decision-making by governments and corporations across risk, investment and policy strategies.

“(The) central message is simple: it's time to wake up. The iceberg is looming. We've got to change course and manage our risks far better than we do at present.”

Howden offered several areas of focus for such action, beginning with the promotion of insurance among non-industry members.

“We need those in the room who aren't insurers or brokers to start talking about it. I want to see a chief insurance offer in every boardroom alongside the chief financial officer,” he said.

“Second, I want you to understand what clients need, listening to the signals, managing those risks and investing in resilience. I also want you to start asking some questions, not just whether your assets are insurable, but what's driving the risk? What risk transfer mechanisms can we use? You need to be much more than just price setters. You need to understand how your price is set, and what you need to do differently to manage those risks.”

Howden added that the industry has improvements to make in ensuring that vendor models are more accessible and easy to understand among non-industry members.

“If leaders are to make the most of our models, they have to understand them. They shouldn't have to wade through pages of arcane data. They shouldn't have to pass some sort of secret insurance initiation exam to understand what we're telling you,” he said.

“This brings me to my final point, which is that we need to change the conversation about insurance. For too long it has been regarded as the prodigal son or forgotten sister of finance, when it should be seen as a strategic asset. In the end, people need to know that insurance is about a lot more than an annual renewal, it's about behavioural change.”