Resilience – the major trends
Market Insight 17 April 2018 17 April 2018
The increased frequency and severity of recent climate change related 1 in 100 events - catastrophes stretching across developed, developing and underdeveloped countries at one go - leads to an urgent requirement for substantial financial support and complex responses to support commerce and communities
Embedding a ‘build back stronger’ approach to disaster is of value commercially for better business resilience and socially when supporting ill-equipped communities.
Policy and government – the shift in the “influence paradigm”
In recent years some central governments have been focussing on other issues due to political change/instability, creating a regulatory gap. This is being further extended by the speed of new technology developments leaving regulators behind.
Increasing development has led to rise in local government responsibility for resilience and disaster planning and management. Their influence is being further strengthened by cities joining together through Mayoral networks to share knowledge and information and lobby central government policy.
After the financial crises, the UN Millennium Goals and the Paris Agreement, new organisations and power centres are coming to the fore to influence opinion and lobby to set policy.
Such Networks include - 100 Resilient Cities Foundation, C40, Mayors, Climatewise, Global Facility for Disaster Reduction and Recovery, IDF.
The World Bank and Asian Development Bank have identified investing in disaster resilience as a crucial component of sustainable development: Climate Wise: Investing for resilience
Societal and economic trends – Urbanisation and globalisation
Urbanisation – by 2030 60% of the world's population will live in cities, mutiplying the resulting pressures on city infrastructures, particularly those areas 'at risk' from extreme weather events and those with poorly equipped existing infrastructures.
Globalisation of the supply chain is resulting in complexities that require stronger resilience strategies (one small disruption can unravel the whole chain) and lead to immediate revenue interruption. Business interruption is the top risk for the fifth year in succession according to the Allianz risk barometer 2017.
Recognition that preventing social and economic disruption through resilience management could prevent under-developed nations from sliding into economic instability and political unrest that can result after a catastrophic event. This can have benefits regarding the length and scale of the international support required to support nations through a catastrophe and introduce a build better, more resilient approach.
Corporates have more intangible assets (now judged to provide 87% of value in Standard & Poor 2015 report compared to 17% in 1975), and this requires a new approach to resilience with protection of earning and cash flow now a chief corporate risk.
New technology and Resilience
Recent technology and data management developments have caused substantial changes in the evaluation of risk and how this could be applied to resilience management, leading to a re-assessment of previously uninsurable risks, and directly resulting in the development of new products and renewed interest in other products (such as parametric insurance).
The developing science of attribution combined with new technology and data developments is supporting new risk modelling approaches and resulting in new opportunities for insurers.
Advancements in battery storage are supporting the development of weather based options to provide 24/7 supply, with the prices of this type of energy decreasing faster than the generation industry is able to adapt.
Insurance is at the epicentre of risk management and the industry's knowledge and understanding of this area is being applied to resilience management thinking and helping to transform the industry's approach to risk management.
This new thinking together with new technology is leading new market opportunities and the development of new products & services for new audiences.
Clyde & Co can help insurers and corporates determine their strategic approach to planning for and responding to unplanned events and advise on establishing a more resilient approach to their risk management.
We understand the vital role resilience management plays in business planning and can provide the C-suite with strategic advice to protect commercial operations and assist insurers as they evaluate their approach to supporting corporates and communities in their resilience planning.