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You Are What You Risk: “A successful community or nation is one where people come together to reduce risk…”

Author and strategist Michele Wucker coined the term “gray rhino” for obvious, probable, impactful risks, which we are surprisingly likely but not condemned to neglect. She is the author of four books including the global bestseller THE GRAY RHINO: How to Recognize and Act on the Obvious Dangers We Ignore, which China’s leadership has used to frame and communicate its crackdown on financial risk. The metaphor has moved markets, shaped financial policies, and made headlines around the world. It helped to frame the ignored warnings ahead of the COVID-19 pandemic and inspired the lyrics of the hit pandemic pop single “Blue & Grey” by the mega-band BTS, about depression as a gray rhino. Michele’s 2019 TED Talk has attracted over two million views.

Michele is founder of the Chicago-based strategy firm Gray Rhino & Company, drawing on three decades of experience first as a financial journalist and then media and think tank executive. She has been honored as a Young Global Leader of the World Economic Forum and a Guggenheim Fellow. She has held leadership positions at The Chicago Council on Global Affairs; the World Policy Institute; and International Financing Review. Her writing has appeared in publications around the world including The Economist, The New York Times, The Washington Post, and The Wall Street Journal. She has been a sought-after media commentator on the Covid-19 pandemic.

Praveen Gupta (PG): I am tempted to call your book the Bible of personal risk?

Michele Wucker (MW): Oh my, what a compliment – but perhaps blasphemous? YOU ARE WHAT YOU RISK is meant to be a wide-ranging set of principles that help to guide people through their lives. And I quote the Bible in the book when re-telling the story of the Parable of the Talents: the master who gives three servants money and reprimands the one who does not invest it. But I also talk about how different religions and value systems shape people’s individual responses to risk in very different ways. The Bible is only one tradition. So perhaps a better description might refer to the great books of many religious and philosophical traditions, since each brings its own perspective to the question of risk.

PG: From business, policy, strategy, financial risk of ‘Gray Rhino’ to the personal approach to risk ecosystem, the new book bridges the two sides of risk?

MW: The deeper I got into researching and writing the book, the clearer it became that we need to look at risk-taking holistically and see the connections that link personal risk attitudes, beliefs, and behaviors to organizational risk culture and the wider risk values that societies embrace and that governments implement. It was a challenge at the beginning, coming from a background in policy, finance, and business strategy, and fearing it was too risky a stretch to take a deep dive into personal approaches to risk. But as I made progress, I came to see that strategic business and policy decisions need to take personal and group risk attitudes into consideration.

In their new book, Daniel Kahneman, Olivier Sibony, and Cass Sunstein disparage such influences as “noise” that interferes with decision making. While we agree that those influences demand attention, I take issue with their premise that some decisions ought to be identical across different scenarios. The risk fingerprints of individuals, organizations, and societies, and the feedback loop among them, are at the heart of who we are, and thus are the most important component of decision-making; decisions are the symptoms.

PG: Gender and colour are ongoing challenges and hence a big obsession for diversity?

MW: Gender and colour can affect our risk decisions, but most likely not in the way you might think. Julie Nelson of the University of Boston has revealed problems with earlier research on gender risk differences; her research suggests that there is a 95 percent overlap between how much risk men and women are willing to take on. This is particularly true when education and experience levels are similar. The biggest difference comes from the experiences that each group shares, which change the risks they face. A woman speaking up in a meeting is more likely to be ignored, or called bossy for being too assertive, or seeing a man take credit for the same idea after she was ignored for raising it. Thus, the risk and reward equation is different for the social risk of speaking up – and women have lots more experience, which makes them better at decision making.

Also, risk stereotyping is a real problem, which often leads to women and people of color being passed over for promotions or investments in their companies. Many women entrepreneurs share war stories of venture capitalists not thinking that women will take enough risks to be worthy of their investments, even though research disproves that stereotype and other research suggests that start-ups founded by women are more likely to succeed than those founded by men.

People may mistakenly think of gender and color as proxies for diversity in risk attitudes. Instead, boards and people making hiring and promotion decisions and assembling team should look explicitly at risk attitudes.

Decision making groups would benefit from ensuring that there is diversity in risk attitudes and tolerance among their members so that they can make better risk decisions. People may mistakenly think of gender and color as proxies for diversity in risk attitudes. Instead, boards and people making hiring and promotion decisions and assembling team should look explicitly at risk attitudes. There are tools for this, like the Risk Type Compass out of the UK. They also can learn a lot from posing scenarios and asking questions like “What’s the biggest risk you’ve ever taken?” and “What’s the biggest risk you’ve ever turned down?”

PG: What numbs humans to recklessly ignore climate risk? What are the chances of us waking up to it, in time?

MW: Humans’ reckless ignorance of climate risk is the consequence of a combination of influences. First is what some social scientists call “solution aversion” which is a tendency to deny the seriousness of problems when we don’t like the solution. This is quite prevalent in part because most humans don’t like change of any kind, so solution aversion comes into play more than we think. Manufactured denial also comes into play: people who don’t like solutions to climate change because they are making money from dirty energy know that they can exploit human nature. The media also comes into play. Here I hesitate to repeat the mistaken impression they disseminate, lest I reinforce it, but I think it’s important to call out as false – that climate change is “slow moving” and something that will happen in the future. It’s here now: extreme weather, rising seas and inland water levels, droughts, wildfires. Finally, a sense of agency is important, but climate change feels so big that many people feel powerless, even though we have more power than we think.

PG: Insurers understand risk. Yet they – the large American ones in particular – continue to invest in and insure the very reasons that are responsible for the Climate Crisis?

MW: It’s very much in insurers’ interest to help solve the climate crisis, and you’re right – it’s a big problem that many insurers continue to invest in and insure the fossil fuel industry. If you insure coastal real estate, businesses and individuals who are prone to flood or fire damage, or any other entities vulnerable to climate change-induced extreme weather, why would you want to contribute to the very influences that put your insured clients – and in turn, yourself – in harm’s way? That question is especially apt when it’s clear that fossil fuels are at a turning point when both investors and policy makers are going to be making big changes.

There has been rising concern by financial regulators and by insurers themselves over whether the industry has enough capitalization to withstand expected losses caused by climate change, and it’s time to stop hand-wringing and take serious action.

There has been rising concern by financial regulators and by insurers themselves over whether the industry has enough capitalization to withstand expected losses caused by climate change, and it’s time to stop hand-wringing and take serious action. The insurance industry also is well positioned to push for meaningful changes by insured entities. Just like many auto insurers reduce your premiums for avoiding accidents, driving fewer miles, and allowing apps to monitor (and hopefully improve) your driving habits, there are so many ways that insurers could nudge clients to reduce their carbon impact.

PG: Would you prescribe risk education at an early age so as to inculcate equity in societal wellbeing?

MW: Kids are getting a risk education already, whether intentionally or not. They see how their parents, teachers, and peers respond to risk misinformation, embracing or rejecting it. Particularly in the West, parents and nanny societies try so hard to protect kids from risks that they teach them to avoid it instead of how to weigh risks thoughtfully. What we need is intentional education in risk literacy: how to understand probabilities and impact, how to acknowledge the respective roles of emotion and reason, and honing those skill sets in practice in different risk scenarios.

PG: Though early days, any signals from the American individualism?

MW: There’s interesting research on the differences between individualist and collectivist cultures on risk responses: how risky people see something as being, what choices they make on their own versus in the group, how gender stereotypes play out, and how much power people feel they have allowing them to make a difference. Paradoxically, sometimes individualist cultures can make people feel that they have less power as individuals, compared to collectivist cultures.

The pathologies of American hyper-individualism have played out in the Covid-19 pandemic, as we’ve seen a stark difference between people who wear masks and are vaccinated to protect others as much as themselves, and others who insist on going mask-less and rejecting vaccines as a show of individualism and political statement.  The latter have made it harder to fight the pandemic. A successful community or nation is one where people come together to reduce risks, and the first sign of decay is when members ignore their responsibilities as citizens.

PG: The Gray Rhino is a well-established metaphor. Any likely ones expected to emerge from your latest work?

MW: The biggest one is the risk fingerprint: the set of influences behind your risk choices, including your innate personality, upbringing, social environment, values and sense of purpose, physical environment, and neurobiology. Like a real fingerprint, some of the aspects cannot be changed, but others can be optimized through awareness, habits, and processes. You cannot control your innate personality nor your upbringing, but you can practice good risk habits, surround yourself with peers with a diverse set of risk fingerprints, and be aware that what you eat, what music is turned on, and the temperature in the room can all sway your decisions.

Your choices leave an imprint much like a real fingerprint does on a flat surface, which forensic investigators can then use to identify the person who left it. This imprint identifies you to the world, much as the fingerprint defines you. That’s why the cover of the book prominently features a maze in the shape of a fingerprint: the maze representing choices and uncertainty, and the fingerprint standing in for identity.

PG: Grateful thanks for these brilliant insights, Michele. May your new book become an international bestseller, too!

The case for resilient EB global programmes: Mitigating Systemic risks!

Managing a global workforce is not just about bridging varying benefits, cultural differences and languages. Nor is it anymore a straightforward strategy to help you engage employees and improve retention, health and performance. If you wish to get anywhere close to addressing this, please remember that you are now dealing with Systemic risks and not just employee benefits (EB) risk/s per se. My first lessons in structuring and running global programmes – out of the London Market – were rather siloed. Each component of a multinational customer’s diverse geographic presence would generally have a different set of brokers, carriers and design. All mutually exclusive and hermetically sealed. Assets, cargo, liability, at best some element of cross class. Benefits would sparingly figure in the list. Yes, an occasional cover for a handful of expats.

The virus that haunts us today – origins zoonotic or manufactured – has forever mutated the physics and chemistry of the EB business. It has brought two things to the foreground – Climate Change and ESG (environment, social and governance). These two intertwine and overlap with the pandemic in ways that EB underwriters do not have the luxury of grand isolation anymore.

So, what’s happened?

The focus of this piece is on Asia. The reality again is diverse – from South Asia to the Far East. Hard core manufacturing ranging from sweat shops to high tech. Services from body shops to the high-end application development centres. Not just the politics and economics but the ESG interplay.

The Pandemic has an expiry date but then it is expected to become an endemic. It’s all set to widen protection as well as the benefits gap. Health resilience to vary depending on the health infrastructure and virus containment policies, as Swiss Re affirms. If affected employees of a top-notch global brand were in an Indian city that turned into a hotspot during the second wave of the pandemic – getting a hospital bed, oxygen and critical medicines et al – notwithstanding the best-in-class benefits programme – could be as challenging as it would for anyone else. The TV channels were full of images including a diplomatic setup in the capital desperately trying to procure an oxygen cylinder for a sick staff. Fancy work places do not preclude them from a Sick building Syndrome. While the affected employees struggled for a treatment or whilst undergoing it, what was the impact of this on the global business that they work for – on rolls or off rolls? Is an outreach a solution? Many Indian corporates, for instance, have been offering benefits no less than the most enlightened multinationals. The challenge is far bigger.

Climate Risks

Economies in south and southeast Asia are most vulnerable to the physical risks associated with climate change. Climate change also poses transition risks, and once again Asia may be most impacted, according to Swiss Re. Climate change has no expiry date nor a vaccine. Remember many S. Asian cities including India have the worst AQIs (air quality index) in the world. Which would mean that employees are not living and working in an ideal environment. The escalating heat and humidity levels in northern India would trigger higher frequency of cardiac and neurological conditions. One, therefore, needs to watch out where you locate the business and thereby the workforce. Needless to mention the return periods of floods and droughts due to overall global warming and poor civic infrastructure and safeguards.

Climate Change impacts lives, health, and supply chains. Unlike the pandemic, assets too. It invokes intergenerational and transregional justice. “A new, highly complex and destabilised ‘domain of risk’ is emerging – which includes the risk of the collapse of key social and economic systems, at local and potentially even global levels,” warns the Institute for Public Policy Research. “This new risk domain affects virtually all areas of policy and politics, and it is doubtful that societies … are adequately prepared to manage this risk.”

ESG

In 2021, investors are under renewed pressure to consider the “S” (social) performance component in their investments. Yet in the world of Environmental, Social and Governance (ESG) investing, the integration of social performance assessment has seen insufficient progress. For all investors, it is important to proactively address these questions because, as the ESG Working Group found, social issues can create key risks. They are salient and will be increasingly relevant in the future according to the Working Group – a pro bono partnership that brings together civil society, experts and private sector.

With ‘Social’ assuming the centre space under ESG, the employee has emerged as a key stakeholder in any business. ‘Zara’ for instance has been under global media scrutiny for its alleged exploitative practices in the Xinjiang province, China. Employees of sensitive components also play a critical role in supply chains and just in time functions. Any weakness in the global chain would only seriously impact the end product. Deficiencies in employee care, therefore, spill well beyond the realm of traditional EB boundaries. In extreme situations triggering issues around human rights, slavery, reputation, employee morale and employee value proposition. Thereby bringing management liability into play.

In conclusion

What may the future manifestations of the overlaps be is anybody’s guess. To be able to address them, risk managers need to anticipate them. This web will only get more intricate by the day. Last week’s action in the courthouses and boardrooms relating to Shell, Exxon Mobil and Chevron moved the ground significantly. This is the beginning of a lot more waiting to happen. Given the dynamic nature of risks, reminds Swiss Re, we are now in an age when forward rather than backward-looking data analysis is paramount. This equally applies to the benefits business and all its systemic entanglements. Silos wouldn’t work!

BLACK SWANS, GREY RHINOS AND UGLY DUCKLINGS

The Journal, Chartered Insurance Institute: May 12, 2012

Black swans, grey rhinos and ugly ducklings | The Journal Magazine (cii.co.uk)

This article is an outcome of a brilliant event hosted by Ethical Systems and Preventable Surprises. Renowned author Michele Wucker brought forth her strategies to empower individuals and institutions to tame the pandemic.

Metaphors capture defining moments but they are vulnerable to clicheing or mutations. The ongoing pandemic, despite the assertion by Nassim Nicholas Taleb that it was a White Swan – flipped to a Black Swan! Needless to mention, each one of us has our own baggage. Interestingly, that influences individual and collective beliefs. Risk management included. Michele Wucker endeavours to demolish entrenched misplaced narrative and puts us head on with the ‘grey rhino’ (#GrayRhino: the American way).

I expect a later discovery – the Green Swan to stay benign – just as conceived by John Elkington – to deliver exponential progress in the form of economic, social and environmental wealth creation. Notwithstanding the simultaneous existence of a Black Swan version for a catastrophic ‘climate event’.

“Biodiversity loss and poor management of natural resources have been linked to the emergence of infectious diseases”.

Alessandra Lehmen is an outstanding Environmental and Climate lawyer qualified in the US and Brazil. She has an LL.M. degree in Environmental Law and Policy from Stanford, a Ph.D. in International Law from UFRGS and an MBA from FGV. Alessandra is a Postdoctoral Laureate at the Make Our Planet Great Again Program of the Presidency of France. At Stanford, she was a Rising Environmental Leaders Fellow, a member of the Board of the International Law Society, and winner of the Olaus and Adolph Murie Award for best work in Environmental Law. She is also a recipient of the Lincoln Institute/Harvard Forest Conservation Catalysts Award. Alessandra has been consistently recognized as a leading global environmental lawyer by British publications PLC Which Lawyer and Euromoney Expert Guides.

Alessandra is a passionate musician. She is the vocalist and lyricist of alternative rock band Lautmusik and was an alto singer at the Stanford Symphonic Chorus.

International cooperation is important and does not need to happen at the expense of sovereignty, but I think conditioning our environmental and climate efforts to external funding is ill-advised and sends a twisted signal.

PG: What is really happening to your forests?

AL: Unfortunately, the pace of deforestation is picking up. In 2020, according to the Global Forest Watch report, Brazil concentrated about 1.7 million hectares – more than a third of the surface of devastated virgin forests on the planet. According to Brazil’s National Institute for Space Research (INPE), the Amazon rainforest lost 11,088 square kms of land, the largest amount in the past 12 years. A recent survey by NGO Imazon Institute concluded that the Amazon had the highest rate of deforestation (810 square kms) in 10 years for the month of March. Also in 2020, the Brazilian and international press reported the tragic advance of fire in two of the most important biomes in the world, the Pantanal wetlands and the Amazon. Although this has fallen pretty much under the radar, fires also severely affected the Pampa biome, in the country’s Southernmost region.

In 2020, according to the Global Forest Watch report, Brazil concentrated about 1.7 million hectares – more than a third of the surface of devastated virgin forests on the planet.

This trend was catalyzed by a series of environmental setbacks. Those include the passing of more flexible forestry laws in 2012, the recent hampering of the Ministry of the Environment’s deforestation control and enforcement actions, lowering of climate ambition, and legislative action aiming at regularizing illegal grabbing of public forests as well as indigenous land. A recent report by Observatório do Clima, a network of environmental NGOs, finds that the Ministry of the Environment’s budget is the smallest in 21 years.

As a result, Brazil has been facing increased scrutiny and pressure from the international community. President Bolsonaro’s speech at the Leaders Climate Summit convened by President Biden was met with varying degrees of optimism and skepticism. Some have commended what was perceived as a change of tone and increase in commitments, such as the revival of the promise to stop illegal deforestation by 2030 (a goal that was already included in Brazil’s first NDC under the Paris Agreement, in 2016) and the indicative goal of carbon neutrality by 2050. Others, including US climate envoy John Kerry, welcomed the pledge but questioned whether the announced measures will actually be put into practice.

President Bolsonaro’s speech at the Leaders Climate Summit… was met with varying degrees of optimism and skepticism… US climate envoy John Kerry, welcomed the pledge but questioned whether the announced measures will actually be put into practice.

What I find particularly problematic is the apparent return of “demanding diplomacy”. After a decades-long effort to position itself as a self-sufficient mid-sized power, as well as a leader of environmental and climate multilateral efforts, Brazil’s current stance is a throwback of sorts to the old practice of conditioning action to the influx of international resources. The revised Brazilian NDC presented in 2020 mentions that at least US$10 billion per year will be needed to implement the pledges, and the government has been reiterating the call for the international community to pitch in.

International cooperation is important and does not need to happen at the expense of sovereignty, but I think conditioning our environmental and climate efforts to external funding is ill-advised and sends a twisted signal. Brazil has shown in the past that it has what it takes, in terms of institutional capabilities and governance framework, to fight deforestation. Putting a price tag on carbon neutrality is also at odds with the government’s failure (challenged in 2020 by means of two cases that are underway at the Brazilian Supreme Court) to adequately channel idle resources of the Amazon and Climate funds. Brazil is particularly well-positioned to become a leader of bioeconomy and low-carbon economy, but is losing momentum. This realization has been leading civil society, corporations, and subnational entities to organize their own movements and engage in paradiplomacy efforts.

PG: In what ways are the palm oil companies contributing to the damage?

AL: According to recent reporting by Mongabay, the Amazon state of Roraima has witnessed a surge in cultivation of oil palm in the last decade, driven by biofuel demand. The goal was to convert degraded grazing areas into palm oil plantations, providing small farmers with a sustainable source of income while blocking further deforestation and allowing local vegetation to regenerate. However, the report cites a surge in demand for cleared land in this region, incursions near and into indigenous lands (entailing a heightened risk of contamination of native populations with Covid-19), and water contamination by pesticides.This latter aspect was challenged in a lawsuit filed by the Public Prosecution Service in 2014, and awaits a decision on the merits. 

This is an interesting question. The issue is relatively less debated than deforestation associated with cattle and soybean production. It should, however, be on the radar – particularly considering the push for biofuels as a means of achieving climate goals.

PG: The Amazon rainforest is now a net contributor to warming of the planet?

AL: The study you refer to looked at the volume of CO2 absorbed and stored by the Brazilian portion of the Amazon from 2010 to 2019. The main conclusion, published in Nature Climate Change, is that it emitted 16.6bn tons of CO2 as a result of deforestation and degradation, and absorbed only 13.9bn tons as the forest grew. Also significantly, the research team – including France’s National Institute for Agronomic Research (INRA), the University of Oklahoma and the University of Exeter – found that degradation – that is, parts of the forest being damaged but not destroyed – accounted for three times more carbon loss than deforestation. These findings have important implications for public policy. As important as zero deforestation programs are, a bigger focus on degradation seems to be in order.

The main conclusion, published in Nature Climate Change, is that it emitted 16.6bn tons of CO2 as a result of deforestation and degradation, and absorbed only 13.9bn tons.

PG: As farms and pastures expand it is increasing the risk of another pandemic?

AL: Absolutely. Biodiversity loss and poor management of natural resources have been linked to the emergence of infectious diseases, which are often triggered by zoonotic outbreaks, for a few decades now. These factors ultimately place people in contact with a natural reservoir or host for an infection, either by increasing proximity – causing the virus to jump species – or by changing environmental conditions so as to favor an increased population of pathogens or their natural hosts. Climate change is clearly adding to the risks.

The IPCC Special Report on Climate Change and Land Use, released in 2019, states that human use directly affects more than 70 percent of the global, ice-free land surface, and that between a quarter and one-third of all land is utilized for food and energy production, which amounts to a 46 percent deforestation rate. The report also states that the impacts are reciprocal: land use contributes to climate change and climate change affects land. Degraded land becomes less productive, restricting the types of crops that can be grown, thus reducing the soil’s ability to absorb carbon. This exacerbates climate change, which in turn triggers land degradation in several significant ways, leading to increased proximity of humans to natural disease hosts.

PG: Do you see any hope in the form of ESG?

AL: I do. Deforestation of the Amazon is largely driven by the production of agricultural and livestock commodities, mainly cattle and soybeans. According to Imazon, more than 90% of deforestation is illegal, and a majority of the land is used for grazing. Climate change in Brazil is, in turn, extensively linked to land use and deforestation. The recent centrality of ESG has the potential to put additional spotlight on the Amazon, and to help steer businesses towards a more sustainable course. I envision two main paths for this to happen: enhanced control of the supply chain, including indirect suppliers (a central concern with regard to the meat industry), and increased scrutiny of the role of financial institutions.

Much of the commodities produced in the Amazon are exported. Tighter rules to halt imported deforestation and outsourced emissions resulting from the consumption of relevant external markets, such as the European Union, entail a greater likelihood of boycotts to Brazilian products. Currently, per the European Commission’s Communication on Stepping up EU Action to Protect and Restore the World’s Forests, a disproportionate 10% of the global share of deforestation is related to EU consumption. Deforestation has been a contentious theme in the EU-MERCOSUR Trade Agreement negotiations. Against this backdrop, monitoring, quantification and disclosure of supply chain emissions is likely to become front and center.

Tighter rules to halt imported deforestation and outsourced emissions resulting from the consumption of relevant external markets, such as the European Union, entail a greater likelihood of boycotts to Brazilian products.

Also significantly, as carbon prices in EUETS soar, there has been a surge in calls for a carbon border tax. The idea is also gaining ground in the US. Regardless of if, or when, we will move more decisively towards carbon pricing and carbon taxes (including border adjustment taxes), we need to prepare for the upcoming “carbon trade wars”, especially if the WTO is able to overcome the deadlock in the organization’s appellate body.

As for the financial sector, The Economist recently published a piece highlighting a study by the CDP, pointing out that only a minority of financial firms are acting. A quarter measure their financed emissions, and almost half conduct no climate-related analysis on their portfolios. However, the oversight of financing of high-impact projects is on the rise – the Brazilian Central Bank has recently launched three public consultations, on the sustainability criteria applicable to rural credit, on regulation of risk management and social, environmental and climate responsibility, and on the annual disclosure, by financial institutions, of a standardized Social, Environmental and Climate Risks and Opportunities Report (the GRSAC Report), respectively. I believe redirecting the money pipeline is key to reversing the course of deforestation.

PG: What role does litigation play here?

AL: I believe litigation plays a key role in this scenario. Companies are increasingly subject to binding ESG obligations. It is possible to anticipate new types of strategic litigation that challenge compliance with said obligations, or, when a corporation appears as the plaintiff, the obligations themselves. Against this backdrop, I also anticipate that strategic litigation will undergo a shift from catch-all rights-based concepts to more granular ESG arguments, such as exposure to stranded assets, climate resilience stress tests in different global warming scenarios, impact investment, and the financing of projects with ESG and climate-related implications.

Another relevant trend concerns transnational ESG litigation. Examples include claims challenging pollution and emissions outsourcing, supply chain disputes spanning multiple jurisdictions, and disputes under trade agreements.

Another relevant trend concerns transnational ESG litigation. Examples include claims challenging pollution and emissions outsourcing, supply chain disputes spanning multiple jurisdictions, and disputes under trade agreements. Outsourcing and supply chain claims target entities that are relatively cleaner in their countries of origin, but are major polluters, or source supplies that are produced unsustainably, in other jurisdictions (e.g. the Total, EDF and Casino cases, based on the French Duty of Vigilance Act of 2017, challenging activities in Uganda, Mexico, and Brazil and Colombia, respectively). Multilateral and bilateral trade agreements increasingly involve sensitive and potentially contentious environmental issues, such as carbon trade barriers and deforestation associated with production of export goods.

PG: Do you see any respite coming in the form of Ecocide laws?

AL: The 2016 policy paper by the ICC Office of the Prosecutor, stating that it would consider the prosecution of environmental cases, has been rightly hailed as a landmark move. It could mean that crimes associated with mass land grabbing can amount to crimes against humanity under the Rome Statute. Could this expand ICC jurisdiction to encompass ecocide? No, as this would depend on the amendment of the Rome Statute, but the policy paper has served the purpose to fuel the debate on the prosecution of international environmental crimes and on the possible conceptualization of a crime of ecocide.

The Environmental Crimes Law, if passed, it will introduce the crime of ecocide in Brazilian law... Ecocide has also made its way into France’s new climate law, which passed the first vote in parliament on May 4.

In the wake of the Mariana and Brumadinho tragedies, in Brazil, Bill nr. 2,787/19 was proposed in order to amend Law nr. 9,605/98 (the Environmental Crimes Law). If passed, it will introduce the crime of ecocide in Brazilian law. The proposed wording defines ecocide as “an ecological disaster by atmospheric, water, or soil contamination, significant destruction of flora or slaughter of animals, which generates a state of public calamity”. Ecocide has also made its way into France’s new climate law, which passed the first vote in parliament on May 4.

PG: Many thanks Alessandra for demystifying all the complex issues facing Brazil and the interconnections with the rest of the world. Wishing you the very best in your endeavours.

Bidding adieu to a doyen: Mr. A.C. Mukherji…

Just as I was to sit down for a Sunday lunch, the phone rang. Next 40 minutes or so followed an impromptu session on unknown facets from the contemporary history of Indian insurance industry. The caller was legendary Mr. AC Mukherji (ACM), former CMD of The New India Assurance. Co. Ltd. A company where I began my career. Interestingly, I got to know him personally well past his retirement from the company.

Two weeks or so, before that call, I had shared with him India’s Coal Story authored by Subhomoy Bhattacharjee. Having thoroughly enjoyed reading it, he said, I have to tell you something which no one after me would know. At such moments you’ve got to leave everything aside. Thanks to Mr. BK Shah, the then Managing Director of The New India Assurance Co. Ltd., we avoided the mistake of creating another LIC or repeating what went wrong with coal, he explained. Created by an Act of the Parliament, every change at the LIC had to be referred there.

For many months after announcing the nationalisation of the general insurance industry, the government was clueless as to what needed to be done next. Interestingly, Mr. Mukherji and his boss Mr. Shah were summoned by the new masters to the Ministry of Finance (MOF). They were asked to prepare an action plan. Months of hard work and 12 box files later, M/s. Shah and Mukherji were back at the MOF. One of their key recommendations was to create a separate holding company – the General Insurance Corporation of India (GIC). Almost 90% of our suggested approach was accepted, he told me. That spoke of New India’s pedigree and credibility in those times of uncertainty. ACM was always respected, in the corridors of power, for his exceptional professionalism.

Whether over a cup of tea at his home in Salt Lake, Kolkata or the Calcutta Club, at airport lounges and locations in or outside India – I had the prerogative of seeking answers wherever and whenever I was face to face with him. ACM always obliged very generously. He was a master story teller, with an encyclopedic memory, who could provide the context and rationale for all that happened in the industry since 1948. The year he joined New India as a management trainee. It was then both a life and non-life insurer (hence the ‘Assurance’) with a GWP of Rs. 2 crores. Not to miss out his joining interview with JRD Tata.

Back in 1995 I had the pleasure of hosting him at an India event in HK. During the coffee break two gentlemen approached him very respectfully and started a conversation in German. I was pleasantly surprised. After they left, he pointed at one of them and said that was Diekmann, recently announced head of Allianz Asia. He should go a long way. But I thought you were conversing in German? Yes, I picked it from my time in Germany. I was posted by New India with Allianz, our settling agent there. He got to know I am around hence the courtesy stopover, explained ACM.

We were in the process of setting up Bajaj Allianz General Insurance Co. Ltd. In late 2000. My boss, Sam Ghosh, asked me to request Mr. Mukherjee to meet him. The reason – Michael Diekmann (later became the group CEO and presently the Chairman of Allianz SE) wishes to have him as the Allianz representative on the Bajaj Allianz board. ACM readily agreed to meet Sam. However, at the meeting he politely excused himself citing a conflict of interest. Given his ongoing commitment to Tokio Marine.

ACM understood people at all levels, had an extraordinary sense of humility, grace and reach. His focus on customer service, policyholder protection and contract certainty were way ahead of time. Likewise, the belief in insurance as a knowledge industry and developing specialty were always on his radar. For much of my early days in the company there was never a mention of ‘PSU’. It was known for its processes and respected in the markets it participated or operated in. He championed management education to ensure balanced development of the rank and file. I remember vividly attending an internal management development programme (MDP) and being told by the eminent faculty – people like Mukherji can run the country. Such is the calibre of your top leadership.

As a seer he could see the coming boom in personal lines. People who dealt with him on complex claims – for instance – be it Space, MLOP or FLOP recall his legendary grip, preparedness, finesse and decisiveness at the meetings. The logic behind the four head offices of nationalised companies; the mergers of various companies into them, to the Malhotra Committee deliberations, and recommendations on the solvency margin regulations – all have his indelible stamp. If the insurance industry ever had a GOAT (greatest of all times), it is him. I have not come across anyone as well rounded and visionary.

There is so much more I can say and I am sure there are many who would have even more fascinating stories to recount. Apart from bidding adieu to one of the finest leaders of our times, ACM is an outstanding role model for the coming generations to emulate and shine. #RIP Mr. AC Mukherji.

“The balancing effect of stringent social and environmental policy and regulation …can harness humans’ innate creativity and self-interest to tackle a host of problems”.

Clive Scott is a pilot and musician who lives on Southern Vancouver Island with his wife of 37 years, Emma.  They have three grown sons, and are expecting their first grandchild in June of 2021.  Clive has been a pilot for 40 years and a musician since first joining the school band in Grade 5. Clive grew up on a mixed farm in rural central Alberta, and spent a great deal of time in the outdoors as a young person.  The influence of that upbringing, and that of his father-in-law, atmospheric scientist Dr. Geoff Strong, has led to Clive’s deep concern for the planet, particularly the critical threat of Anthropogenic Global Warming.  The progressive and compassionate attitudes of his parents, and the music of his youth, particularly the protest songs of the 60s and 70s, imbued in Clive a strong sense of social justice, and the importance of connection and empathy toward each other and our planet. 

Growing up I was certainly influenced by the protest songs of artists like Neil Young, Joan Baez, Bob Dylan, Bob Marley etc. 

Praveen Gupta: What’s more dominant for you – singing or composing?

Clive Scott:  Definitely composing – I’ve never particularly cared for my voice as it has quite a limited range.  And to be fair, I’ve always focused more on developing instrumental rather than vocal. I love the composing process, particularly today when one has the tools of a recording studio available at home on the computer.  I currently use Logic ProX and cover all the instrumentation on most of my recordings – unless working on a specific collaboration.

PG: Is there something about music and flying that awakens your concern for climate?

CS: I remember loving the land as a kid growing up on the farm.  And flying allows one a different perspective of the beauty of the planet. The growing awareness of the large CO2 footprint inherent in jet aviation has certainly spurred a desire to become more involved in the climate movement.  The airline I work for is taking active measures in fuel reduction and the purchase of offsets which, while far from solving the issue of footprint, is a start in that direction.

The growing awareness of the large CO2 footprint inherent in jet aviation has certainly spurred a desire to become more involved in the climate movement… Interestingly, COVID 19 has shown us that much of airline travel, while desirable, is not essential.

PG: Would your compositions be any different if you were not a pilot?

CS:  Tough question.  Probably.  I think that music reflects the conscious and unconscious rhythms of our daily lives. Flying has also taken me places I might not have seen otherwise – everywhere from New York to wild isolated areas in the Canadian Arctic.  I know that some of my music has been inspired by the landscapes and people I knew while growing up on a mixed farm in Alberta, Canada.  

PG: How’s been the evolution of the pilot in you? What did you start with and what do you fly today?

CS:  I began flying light aircraft in 1981.  My first jobs as a commercial pilot were instructing, small aircraft charter, and crop spraying.  I worked for a number of years as the Chief Pilot for a small charter company flying Twin Otters and other small aircraft in Northern Canada. Following that I worked for Bombardier Canada on a military flight training contract for a few years, followed by a three-year stint with Transport Canada as a civil aviation inspector.  In 2000 I joined WestJet Airlines, based in Calgary Alberta, and have been a captain on the Boeing 737 since 2001.  

PG: How soon do you see flying transforming as environmentally friendly?

CS:  Tough question – I don’t know if flying will ever be environmentally friendly.  The big question is, can we make it sustainable?  Certainly, there is some very promising work being done with alternate fuels such as bio-kerosene, which can reduce CO2 footprint a great deal.  H2 is more problematic due to storage and weight considerations.  There have been great strides made in electric aircraft for short range applications.   Interestingly, COVID 19 has shown us that much of airline travel, while desirable, is not essential – certainly, a lot of business is now conducted remotely.  We may eventually have to view aviation against the larger picture of decarbonization and decide how much is really essential and perhaps look at limiting its scope. 

There are currently 24 trillion worth of cash and assets stashed in tax free havens around the world – yet we are told that transitioning to a carbon free economy is too costly.

PG: Any insights into cover band and the acoustic project? What are your favourite genre?

CS:  Our cover band is called The Chameleons.  We do rock and R&B from the 60’s through to today. Stuff that’s recognizable and danceable mainly, from the Stones, Cream, and the Beatles to the Black Keys, Bowie, U2, Peter Gabriel, and the Foo Fighters.  We are 5 guys who have been around for a while – we take the music seriously but keep egos in check and just have fun with it.  I cover the guitar work in the band.  

The acoustic project is more a vocal showcase for our singer, Dylan.  He has a huge range and is very accomplished.  We are covering some of the Chris Cornell/Eddie Vedder acoustic stuff, as well as some of the Paul Simon, Led Zeppelin, Neil Young acoustic library. 

As to my favourite genre it’s really hard to say. I listen to everything from Classical to Jazz to Metal.  In terms of playing – I sure do love a good driving blues rock tune. 

PG: Does music help you influence more and more people to be climate/ environment friendly?  

CS:  I certainly hope it does.  But I’ve never had direct feedback on that specifically.  Growing up I was certainly influenced by the protest songs of artists like Neil Young, Joan Baez, Bob Dylan, Bob Marley etc. 

PG: British Columbia and Alberta are stunning havens of nature. Rampant deforestation and the tar sand projects can destroy what nature has endowed. Do you see any popular resistance to the extractive and fossil fuel business?

CS:  There is certainly popular protest aimed at resource extraction and logging in Canada.  There are currently a number of protests against the continued logging of the remaining old growth temperate rain forest in British Columbia.

The oil sands operations in Northern Alberta are spending a great deal to clean up their direct impact on the land, with varying degrees of success.  Most of the fossil fuel protesting in Canada revolves around the construction of pipelines, particularly to the West coast.   In general there is a pretty active movement across the country in favour of transitioning away from fossil fuel use.  And a number of protests in Alberta right now against the opening of previously protected land on the Eastern slope of the Rocky Mountains to coal mine expansion. 

PG: ‘Killers in Suits’ – is this composition a commentary on capitalism?

CS:  Oh, definitely.  The thing is, I’m not completely against capitalism per se.  I believe that with the balancing effect of stringent social and environmental policy and regulation, capitalism can harness humans’ innate creativity and self-interest to tackle a host of problems. But to do this strong democratic government prioritizing environmental stewardship, social justice, and compassion, is absolutely crucial. 

 “Killers in Suits” addresses the darker side of capitalism, the institutionalized and untrammelled greed that always prioritizes profit and ROI over all other concerns. (The one drop rhythm is a little nod to the social justice songs of the Jamaican reggae genre’). There are currently 24 trillion worth of cash and assets stashed in tax free havens around the world – yet we are told that transitioning to a carbon free economy is too costly. The world spends 2 trillion a year on military expenditures, yet we are told that addressing social injustice is too costly.   Addressing and shifting this paradigm is the single greatest challenge facing humanity today. 

PG: Wonderful speaking to you Clive. May your music heal the Planet.

Behind the Kerry smokescreen: Lessons on Climate Change for Indian insurers!

John Kerry’s visit to talk India into containing its carbon footprint – first demands some answers from the United States. “We believe that this exercise by the US government is a smokescreen to hide its own long record of inaction on climate change and its continual attempt to pass on the burden of climate change mitigation to other countries, especially those of the Global South that are far less equipped than the US to undertake radical energy transitions”, says a statement by Teachers Against the Climate Crisis (TACC).

Having said that, there are lessons to be learnt from the far-reaching actions unleashed by the Biden administration including those to tame its insurance industry. Banks, asset managers and insurers have for long been the critical money pipeline for fossil fuel. If the Climate Crisis must be mitigated – that is where the action ought to begin.

Sunset at Maafushi, Maldives. If the hungry tides were to gobble Maldivian islands, chunks of coastal India including Mumbai would be vulnerable, too.

Seeking answers from its insurers

Nothing can better demonstrate the resolve and urgency of the administration to rein in the US insurers from aiding and abetting the Climate Crisis than a letter sent out to CEOs of eight major insurance companies. This is signed by four Democratic party senators including Elizabeth Warren. “In order to better understand your fossil fuel underwriting and investment policies, we are requesting that you answer the following questions by April 16, 2021.

1. Have you studied how your company’s annual claims and premiums will evolve as climate-related losses burgeon over the coming decades? Which climate scenarios have you studied?

2. Have you conducted a stress test of your company’s exposure to fossil fuel assets? Which scenarios have you used? What did any stress tests reveal about your company’s exposure to fossil fuel assets?

3. How are your company’s fossil fuel underwriting and investment policies consistent with your broader commitments to sustainability?

We write you regarding your underwriting and investment policies pertaining to coal and other carbon-intensive projects such as oil and gas production from tar sands and in the Arctic and Amazon. As the leader of a major insurance company, you know the significant financial and economic risks climate change poses to both underwriting and investment.”

The letter then goes on in great detail covering the following:

Economists, central bankers, financial regulators, asset managers, investors, insurance analysts, credit rating analysts, investment bankers, real estate professionals, and scientists have produced an enormous trove of research suggesting that climate change and the failure to plan for an orderly transition to a low carbon economy are capable of producing staggering economic losses. These losses relate to the physical risk of damages caused by climate change or the transition risk of stranded fossil fuel assets as the economy transitions to low-carbon sources of energy.

It goes without saying that the physical risks of climate change pose a serious threat to insurers, both on your assets side and on your claims side. There is ample data that rising sea levels and increased storm intensity and activity will do substantial damage to coastal property values. These warnings have come from a variety of experts, including Freddie Mac, the industry publication Risk & Insurance, and the Union of Concerned Scientists.

In addition to sea level rise and coastal storms, more frequent and intense wildfires, riverine floods, droughts, and heatwaves will also result in very large losses, much of them insured. Indeed, the management consultancy McKinsey warns of massive physical risks that will increase “nonlinearly” as the earth continues to warm.

Transition risk is also significant for insurers that hold large stakes in fossil fuel assets. One economic paper reports “economic literature combined with industry practices suggest the presence of persistent market inefficiencies for fossil fuel reserves, so these assets are likely to be stranded and mispriced, i.e. a carbon bubble exists ….” Another finds “the magnitude of … stranded assets of fossil fuel companies (in a 2 degrees C economy) has been estimated to be around 82% of global coal reserves, 49% of global gas reserves, and 33% of global oil reserves.”

The market value of fossil fuel reserves that cannot be burned is “around $20 trillion,” according to the World Bank. A study done by the European think tank CEPS predicts that “fossil fuel companies altogether would see their market value fall by half.” Central banks are also increasingly concerned about transition risk.

The Bank of England has warned, “investments in fossil fuels and related technologies . . . may take a huge hit.” The Bank for International Settlements also warned of stranded fossil fuel assets in its recent report on climate-related economic risks. And a report from 34 central bank presidents warned that “estimates of losses […] are large and range from $1 trillion to $4 trillion when considering the energy sector alone, or up to $20 trillion when looking at the economy more broadly.”

Concern over the risk that stranded fossil fuel assets pose to insurers is not merely academic. A stress test of European financial institutions revealed that some were over-exposed to fossil fuel assets and could be at risk should these assets plunge in value. Indeed, the Bank of England has become so concerned about systemic risk associated with stranded fossil fuel assets that it ordered the life insurers it regulates to perform stress tests including a stranded fossil fuel asset scenario. American regulators are also beginning to signal they take climate-related financial risks seriously. Federal Reserve Bank Governor Lael Brainard warned of climate-related shifts in asset values and “abrupt tipping points and significant swings in sentiment” in the Fed’s most recent biannual financial stability report.

In response to these risks, an increasing number of your competitors have stopped underwriting coal and other fossil fuel projects and/or restricted their investments in coal and certain dirty and environmentally damaging oil and gas projects such as tar sands.

It’s in our interest to act

A small beginning has been made by select banks in the form of self-disclosure. Extreme weather puts debt worth $84 billion at risk at India’s top banks, according to Carbon Disclosure Project (CDP) – India. The country’s largest lender, HDFC Bank, IndusInd Bank and Axis Bank are among the institutions that reported climate risks to CDP in 2020, it said in its recently released annual report. While a lot more banks need to join this exercise, a small beginning has been made.

The Indian insurance regulator (IRDAI) is yet to initiate Environmental, Societal and Governance (ESG) as the way forward. The total investment corpus of all Indian insurers now adds up to US $ 600 billion. The physical and transition risks of the insurers need to be quantified. There is enough science pointing at the growing storms both along the east and west coasts, floods and droughts; sinking cities; the rising heat and humidity in the northern plains; the shrinking glaciers in the ‘third pole’ region and its grave implications for the river systems; increased deforestation and threats to bio-diversity across the country. Despite a low per capita contribution, we are already the third largest polluter in the world. Many of our cities have terrible Air Quality Indices. By insuring anything that contributes to these woes – insurers provide a further blow to sustainability.

Life Insurance Corporation of India (LIC) – the largest insurer – continues to invest significantly in fossil fuel business – including the NTPC and Coal India. Given all its environmental vulnerabilities, it is in the country’s best interest to act. And act must the insurers who may be aiding and abetting the Climate Crisis. While we should be mindful of the Kerry smokescreen and push him back, we cannot be mindless to what the US has finally started doing – something it ought to have begun three decades ago.

 

Ethics/ESG: Investments by insurers!

March 19, 2021

Asianinvestor

“Data and analytics are fundamentally reshaping the relationships between insurers, consumers, and the public.”

London based Duncan Minty is an independent ethics consultant, specialising in the insurance sector. He’s worked with a range of insurers over the past 20 years, helping them turn a commitment to ethics into practical improvements. He has written extensively on the ethical issues raised by data and analytics in insurance and was a member of the Chartered Insurance Institute’s Digital Ethics Forum. He’s currently co-writing two academic papers on data and insurance. Duncan is also a Chartered Insurance Practitioner, having worked in the UK insurance market for 18 years.

The key realisation that insurance strategists now need to take on board, is that that power situation is changing, and digital is the force behind it.

Praveen Gupta: When I started with the industry, conceptually the nearest insurers got to ethics was Utmost Good Faith and Moral Hazard. What made it formally tip towards ethics?

Duncan Minty: Problem with both of these concepts is that they were created by and controlled by insurance people, with little input or influence from policyholders, so the tip they gave to ethics was a marginal one.

For example, UGF was invariably portrayed as an obligation on the insured, when it was in fact an obligation on both parties, something which insurance people did little about.

With moral hazard, research by the legal scholar Tom Baker has shown how insurance’s handling of moral hazard evolved over time and the picture that emerges is one of its use being one of adaptation and evolution. Concepts and principles have been made to serve the needs of the market as it evolved to meet both opportunities and threats.

This process is still happening, but this time more in terms of concepts such as actuarial fairness and behavioural fairness. Again, these are all concepts controlled by and imposed by the sector on consumers. They are expressions of the power of the financial sector, over consumers and the like.

The key realisation that insurance strategists now need to take on board, is that that power situation is changing, and digital is the force behind it.

The key realisation that insurance strategists now need to take on board, is that that power situation is changing, and digital is the force behind it.

The UK’s leading scholar on ethics and information, Professor Luciano Floridi, says this…

“What we’re seeing today is the very beginning of another switch, from power over things, to power over information, to power about the questions that shape the answers that give the information about things…”

Insurers think they’re in the second phase – ‘power over information’ but what the digital era is now evolving into the third phase – power over the questions that shape the answers.

The forces that have brought about this tipping are…

  • The shift from ‘tell me’, to ‘show me’, to now ‘prove to me’. Deference to the professional is no longer a given – some sectors earn it well (doctors), while other sectors (insurance) are struggling with this shift.
  • The shift in power – digital may be revolutionising insurance (a good thing) but it is also revolutionising much wider things, and many scholars are seeing this.

PG: To what extent have Data and Tech necessitated this?

DM: Digital technology is a central force in this. It is revolutionising many things in our society, but in sectors like insurance, there is a lack of perception that digital is revolutionising power relationships, and that as a result, the sector’s decisions, performance, and outcomes are all there to be scrutinised.

In sectors like insurance, there is a lack of perception that digital is revolutionising power relationships, and that as a result, the sector’s decisions, performance, and outcomes are all there to be scrutinised.

To give you an example, for many years, insurance pricing was seen as nothing to do with ethics, and everything to do with the market. And the courts were broadly supportive of this. Now, however, as a result of the super-complaint, that perception has completely changed. You saw a civil society organisation with the special power to issue a super-complaint, doing so, forcing a regulatory review on its allegations, and finding the regulator conclude that price walking was fundamentally unfair. As a result, the most common approach to retail insurance pricing is about to be banned. Here you have the shift in power, and the use of digital technology facilitated it.

Data and analytics are fundamentally reshaping the relationships between insurers, consumers, and the public. The insurers who are recognising this are the ones designing their data and analytics to reflect those new relationships.

PG: What’s been the influence of regulatory unification? 

DM: We are definitely seeing great coordination between regulators. I think of this as a grid – you have horizontal regulators in the UK like the Equalities and Human Rights Commission, and the Information Commissioner’s Office, and you have vertical regulators like the FCA with its focus on financial services, and say, the Solicitors Regulation Authority.  Each are feeding into each other’s work.

Ethical issues don’t stay within regulatory boundaries, so this coordination between regulators is just a reflection of reality. Now there’s even a regulatory coordination group in the UK that has formalised this working together.

What regulated firms like insurers need to really tune into, is the increasing use of data and analytics by the regulators themselves. This is called supervisory technologies.

What regulated firms like insurers need to really tune into, is the increasing use of data and analytics by the regulators themselves. This is called supervisory technologies. The FCA here in the UK have been a leading proponent on this and we are seeing SupTech used in recent regulatory investigations. The FCA has even boasted about their SupTech capabilities to a Parliamentary committee.

The affect of SupTech is that it will do two things:

  • Provide the hard evidence for misconduct, potentially as a granular level – that firm in that place is making these poor decisions.
  • It will increasingly be used to identify misconduct as it occurs, rather than after the damage has been done.
  • It will provide the evidence for individual accountability being enforced with more confidence, so individual insurance executives being held to account for the decisions they’ve made, and the outcomes generated.

We’ve seen this in the UK with insurance pricing. I now expect this to increasingly happen with regard to claims. There are some claims practices that I believe will be judged as fundamentally unfair, such as claims optimisation and settlement walking. And in fact, when practices such as these come to be judged by regulators and parliamentary committee, I foresee the public’s reaction to be much worse than with price walking. Reputations in insurance have a very uncertain future.

PG: Do you expect the evolving practices across the reinsurance world influencing the conduct of insurance overall?

DM: I think that reinsurers are in a unique position. They are caught between what here in the UK is referred to as a rock and a hard place. They think in more ‘long term’ terms than the typical insurer, and so invest in trends that have the potential for revolutionising insurance. Yet the problem they often have is that some of those trends are seen as positive and some as negative. Reinsurers have to follow up on their ethical commitments and make difficult decisions around whether to step back from the negative ones or continue to invest in them.

Two examples of this are facial and emotion analytics, and the use of genetic data. The global reach of many reinsurers means that they cover markets where use of these types of analytics and data are seen as very normal, and other markets where such use is forbidden.

Two examples of this are facial and emotion analytics, and the use of genetic data. The global reach of many reinsurers means that they cover markets where use of these types of analytics and data are seen as very normal, and other markets where such use is forbidden.

So, they have to be good at handling complex ethical dilemmas, and to be honest, they’ve some way to go on this. I’ve listened to very senior reinsurance people publicly say that they couldn’t do practice A or B, while several levels down in their organisation, that is exactly what they’re doing. I’ve been on reinsurance conference panels to discuss how analytics X or Y should be deployed with great care, when the host reinsurer is already deploying it.

There is debate, but it is still too controlled by the market. Remember my earlier comments in relation to power. It’s something that reinsurers need to be very aware of, for if the powerful actors that digital has brought forward, are not then engaged with on equal terms, the result will be challenge rather than support. Many insurance people don’t realise just how much political support those powerful new actors can draw upon.

PG: Thank you very much Duncan – for sharing these critical developments in the UK. There is much to be learnt by other common law jurisdictions, sooner than later.

Extreme Risks: Lessons from India

Chartered Insurance Institute Blog: February 19, 2021

https://thejournal.cii.co.uk/2021/02/19/extreme-risks-lessons-india

My latest blog for the Chartered Insurance Institute Journal: Given that #ClimateCrisis is assuming the form of #extremerisks – insurers can ill afford to model risks in isolation. The rapidly evolving frequency and severity together with the interplay of several triggers, demands a whole new approach.