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USA - How the U.S. Could Be Smarter About Insuring Against Extreme Weather-Related Disasters

With parametric insurance, the full power of modern computing, data digitization, risk modeling and Artificial Intelligence meet.

Monumental challenges are all around us: the COVID-19 pandemic, the masses of people in the streets demanding racial justice, and the increasingly painful afflictions of climate change. While the pandemic is constantly unfolding, and the protests are calling for a centuries-old reckoning, the impact of climate change is ever-present, and the underlying cause of a cascade of crises globally, from fiercer and more frequent storms, floods and heat waves, to swarms of locusts on three continents, to a growing population of climate refugees likely to be the largest movement of humans the world has ever seen.

None of these events occur in a bubble. They cannot be viewed discretely from one another; just as the pandemic has shown us how combating a virus and restarting an economy cannot be decoupled and addressed individually.

How will we even begin to tackle such monumental, complex challenges? There is, in fact, one industry that is particularly well-equipped to solve such large-scale problems. It represents $31 trillion in assets—roughly 43 times the annual U.S. Department of Defense budget—can move markets and reshape societies, and indeed has done so repeatedly, and is in the business of risk so is well-suited for these times. I’m speaking, of course, of insurance.

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