Insurers need catastrophe resilience ratings, similar to credit scores, for their risk-based premiums in cities, according to a Lloyd’s of London study entitled
Future Cities: Building Infrastructure Resilience.
The call for incentivizing emergency preparedness in urban infrastructure as an adaptation to climate change comes ahead of the warming weather in America that brings hurricanes and untold natural disasters along with the higher temperatures.
“Most global population increases are expected to take place in cities that are more at risk from natural hazards, and cities in general are exposed to a greater diversity of risks than ever before,” John Parry, CFO of Lloyd’s said in a press release. “It is absolutely critical, therefore, that city officials, working with insurers and other stakeholders, act to improve city resilience. The principles set out in this report represent a new approach that could substantially improve infrastructure resilience around the world.”
Lloyd’s said $4.6 billion of potential GDP from 301 cities is threatened by catastrophes over the next decade.
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The report also outlined the value of brokers following a disaster, recounting a flooding event in Thailand where local brokers pressured foreign reinsurers into resolving claims in an expedited fashion.
“Brokers have an important role to play in this process. They can help insureds to better understand the risks they are facing, and ensure good quality information is passed on to the underwriters so they can write better insurance policies,” the study said.
Another recommendation from the report was for brokers to carry out resilience services, not unlike the risk-management advice they currently provide.
Facilities management, disaster recovery, “build and operate” contracts could all be aspects of the resilience services, the study said.
“Multiple factors build resilience and these should be measured and summarised by creating indices. This is essential to enable insurers to better incorporate levels of resilience into the underwriting process, which would then be expected to recognize and reward the action taken by city officials where risk-based pricing is permitted,” Trevor Maynard, head of innovation at Lloyd’s said.
The study outlined diverse transportation options, greater energy distribution, accessible water infrastructure and cyber-terrorist-resistant communications security as important factors for the future of cities, should a crisis come.
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