Water shortages and flood risks arising from climate change have been on the agenda for Airmic’s Water Special Interest Group (SIG), alongside insurance market concerns about pricing and innovation.
The Water SIG has been chaired for the past decade by Philip Robinson, group risk and insurance manager at Anglian Water Services, but he suggests the pandemic period of the past year has been a particular challenge.
Climate risk and the need for more insurance market innovation in creating parametric solutions have been recurring themes at recent meetings, including the most recent session in May, he tells Airmic News.
“Climate dominates what we do,” says Robinson. “We don’t get enough rain in parts of our region, the East of England, while the local population is growing. If we don’t address that, there is a serious risk that 20 years from now there won’t be enough water.”
Parametric insurance solutions use a measurable index, such as rainfall within a given period, as a trigger to automate indemnity, rather than a traditional insurance claims process. Robinson says water companies are keen to know what innovation is taking place in the insurance market to come up with new parametric products.
“These are themes we’ve discussed before and we will discuss again because the market is changing and because people need to keep tabs on the situation and what products are available. This is a climate affected business, from volumes of rainfall and warm or cold weather, and everything else in-between, so climate strategy is becoming a crucial issue for us,” he says.
Another key topic has been the hardening of prices experienced by insurance buyers within the past two years. Insurer Generali gave a presentation, on its view of insurance market conditions and the risk environment coming out of Covid, at the most recent Water SIG in May.
“I think insurers are being selective. When things go wrong in the utilities sector they can go badly wrong, so I think insurers are being cautious and trying to maintain a balanced risk profile,” says Robinson.
Some UK water companies suffered more claims than others, affecting insurers’ perceptions of risk, he suggests. Localised rains and floods can also produce different loss patterns around the country, with areas of Yorkshire and Northumbria worst hit in recent years.
“We have a good claims history,” he says. “However, our infrastructure is in different places geographically, which does lead to some challenges, particularly for fenland areas, which are on reclaimed land at or even slightly below sea level.”
The pandemic has necessitated that recent meetings of Airmic’s SIGs go digital, which has had some benefits for utilities firms, with the UK’s water providers in particular spread around the country.
Numbers have increased at recent events, Robinson says, consistently in double figures, a few more than previously. Robinson notes that a representative from Scotland finds it easier to tune in to a virtual event than to travel to a physical meeting in London.
“The format, that the pandemic forced upon us, has made the SIGs more accessible,” Robinson says. “As technology improves and meetings and businesses move towards a hybrid of office and home based working, the experience gets closer to being in the room.”
The next meeting is set for October, and thinking is turning to how things will be after the pandemic.
“Most people who are accustomed to attending in person will want to go back to that, because you still miss out on some of the networking and social interaction. However, video calls are making it easier for people to interact and for digital events to work more intuitively,” he says.
“I hope the technology will continue to allow people the chance to join a meeting digitally rather than travel for several hours. I think a hybrid approach, with dial-in as well as physical attendance, is going to be the way forward.”
Alex Frost, Airmic research manager, who facilitates the Airmic SIG communities, commented: “Although the pandemic has presented many challenges for systems and ways of working, a silver lining is the way technology has helped us overcome isolation and led to a resurgence in community activity.
“More than ever, Airmic’s members are gathering together to discuss different lines of business, risks, or themes which impact them across different industries. Shared experience and working together are at the heart of Airmic’s mission and are reflected in our communities strategy,” Frost added.