Page 46 - The Insurance Times May 2025

Risk to Opportunity

From Risk to Opportunity: How InsurTech is

Transforming Climate Risk Management

Introduction mate risks. This inadequacy results in underinsurance, es-
pecially in high-risk regions, and leaves many vulnerable
The frequency and intensity of climate-related disasters-
ranging from floods and droughts to wildfires and hurri- communities without financial protection.
canes-have made climate risk one of the most pressing chal- How InsurTech is Addressing Climate
lenges of our time. For insurers, this translates into rising
claims, evolving risk models, and a growing protection gap. Risk
Traditional methods of underwriting and risk assessment are 1. Predictive Analytics and Risk Modelling
struggling to keep pace with the unpredictability and com- InsurTech firms use AI and ML to analyze vast datasets-in-
plexity of climate change. Enter InsurTech: a dynamic con- cluding weather patterns, topographical maps, and socio-
vergence of insurance and technology that is turning climate
economic indicators-to develop forward-looking risk models.
risks into opportunities for innovation, resilience, and sus- These models are more agile and responsive to changes in
tainable growth. the climate, enabling insurers to price risk more accurately
and create customized products for different regions.
InsurTech companies are leveraging cutting-edge technolo-
Companies like Jupiter Intelligence and ClimateAI offer pre-
gies such as artificial intelligence (AI), machine learning
(ML), blockchain, satellite imaging, and big data analytics dictive climate analytics to forecast climate exposure for
specific assets, helping underwriters and risk managers make
to revolutionize how climate risks are assessed, priced, and
informed decisions.
managed. By providing real-time insights, predictive
analytics, and parametric solutions, InsurTech is making cli- 2. Parametric Insurance Solutions
mate risk management more proactive, inclusive, and effi-
Parametric insurance is gaining popularity as a climate re-
cient.
silience tool. Instead of indemnifying the actual loss, para-
metric policies pay out when a predefined index-such as
The Climate Risk Challenge in the Insur-
rainfall level or wind speed-is triggered. This allows for
ance Industry quicker payouts, reduced claims processing, and lower ad-

Climate change has introduced new dimensions of uncer- ministrative costs.
tainty. Rising sea levels, heatwaves, and extreme weather Startups like Arbol and Raincoat are developing blockchain-
events are causing significant economic and social disrup- enabled parametric insurance platforms that support farm-
tions. According to Swiss Re, global insured losses from natu- ers, municipalities, and small businesses in weather-sensi-
ral catastrophes exceeded $100 billion in 2023 alone. The tive regions.
insurance industry must now account for slow-onset events,
non-linear climate impacts, and regional disparities in vul- 3. Satellite and Remote Sensing Technology

nerability. Satellite imaging and drones are being used to assess envi-
ronmental damage, track deforestation, and monitor crop
Traditional insurance models, based on historical data and health. These tools provide real-time data for risk evalua-
static risk profiles, often fall short in anticipating future cli- tion and claims verification.

42 May 2025 The Insurance Times