Insight Session – Peril Pricing and Climate Change

Presented by Mark Leplastrier – 4 December 2018

With stories in the news of flash flooding in NSW and bushfires in QLD Mark Leplastrier’s Insights Session on the impacts of climate change and the challenges for the pricing of insurance risks was timely.

Mark, who joined IAG Insurance in 2001, heads a team of specialists who use science, engineering, meteorology and hydrology to form a view of the natural peril risk for any location and to ultimately determine the premium to be charged. Using these disciplines, it is possible to determine how the risk profile varies across a region and to even identify the main natural peril risks for different properties within the same suburb.

With a focus on the natural perils of hail, cyclone and flood, Mark demonstrated some of the challenges of determining the impacts of climate change and how this affects the risks faced by insureds.

• Understanding how the topography of an area can impact on the intensity and pathway of a hailstorm.
• Improved building codes are making buildings more resilient to wind damage during a cyclone but the risk of water inundation remained.
• How to price for a natural perils in areas that have not previously been affected. For instance, how have catastrophe models allowed for the likelihood of cyclones impacting further south and has this been allowed for in the pricing of property risks.
• How have the return periods of particular weather events been affected.

However, the amount of information that is available should not be underestimated even for events that occurred last century.

Another aspect that Mark highlighted was how the mitigating factors of building codes and planning controls could assist in minimising the impact of extreme weather events. A question was posed about how much should insurers assist governments and other authorities to identify how the natural peril risks have changed. Could insurers determine the financial impact of different extreme events and even guide authorities on the best places to build and the places to avoid.

Finally the key message that I took from the session was how the impact of climate change on extreme natural events, increasing frequency and intensity, was already being experienced and that we should not wait for further extreme weather events before taking action.

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