Page 107 - India Insurance Report 2023- BIMTECH

India Insurance Report - Series II 95

As the impact of climate change is perceived significantly in the most recent times, the 2011 – 2021
period proved to be extremely challenging for India as far as the natural catastrophic events and their toll
on the (re)insurance industry in particular. Manifold increase of extreme precipitation events and multiple,
high-intensity landfalling storms due to climate change has resulted in enormous economic losses, which
in turn has impacted the (re)insurance industry. In addition, India suffered back-to-back tropical cyclones
since 2018. Tropical Cyclone Amphan in 2020 resulted in approximately $14bn of economic losses in
[7]
India . Cyclone Tauktae, which made landfall near the coast of Gujarat, has also inflicted significant
insured losses, with the power, telecom, and infrastructure sectors being most impacted [8,9] . Millions of
residents across India were displaced by the large-scale monsoon flooding and back-to-back devastating
landfalling cyclones – Nisarga and Amphan. At the same time, the (re)insurance industry faced numerous
challenges in the claims settlement process, as the country-wide lockdown in India severely disrupted
the supply chain, leading to substantially increased replacement lead time for the damaged assets.

Populations at risk of the unpropitious impacts of climate change are determined by geographic,
socioeconomic, and demographic factors. Climate change poses a significant impact on human health,
both directly and indirectly. Some of the numerous ways in which climate change affects human health
include heat-related illnesses, increased respiratory problems, infectious and water-borne diseases,
malnutrition, and, most importantly, mental health. There has been a notable increase in the incidence
of climate-sensitive diseases, injuries due to natural disasters, and deaths caused by extreme weather
events. As climate change poses significant risks to human health, addressing it requires urgent action to
reduce greenhouse gas emissions and mitigate its impacts.

As the frequency and severity of climate-related events such as hurricanes, floods, wildfires, and
droughts increase, the role of (re)insurers in mitigating these risks becomes paramount. (Re)Insurers
play a critical role in not only providing financial protection against climate-related losses but also in
actively working to mitigate the impacts of climate change. This article will explore the important role
of (re)insurers in risk mitigation for climate change and highlight their efforts in driving positive change.

Section 1 : The Role of (Re)Insurers in Climate Risk Assessment

Climate change related risks are categorised as physical and transition risks. While physical risks
arise either from the changing climatic trends or from catastrophic events, the transition risks emanate
from the transition to a low-carbon economy, which may trigger, among other things, policy, legal,
technological, market and reputational risks. (Re)Insurers play a crucial role in assessing and quantifying
climate risks. They employ sophisticated risk modelling techniques, data analytics, and scientific research
to evaluate the potential impacts of climate change on various sectors, including property, agriculture,
energy, and infrastructure. By analysing historical data and projecting future scenarios, (re)insurers can
provide valuable insights to governments, businesses, and communities to help them make informed
decisions on climate risk management strategies. This includes identifying vulnerable areas, recommending
adaptation measures, and encouraging the adoption of resilient practices.

One of the fundamental requirements for (re)insurers in the assessment of physical climate was
improvising the historical catastrophic risk models to equip them with an explicit input for climate
change in line with various IPCC scenarios to better estimate the return period of various climatic