Insurers Know Something You Don't
From short-term policies to long-term exposure
A breakfast briefing with alpha-ww reveals the changing face of risk, from parametric triggers to the rise of the "Chief Adaptation Officer."
I recently joined a breakfast roundtable hosted by alpha-ww (thanks to Seb Wood and Kelly Harrison for the invite). The topic was one that usually stays in the “back office” until something goes wrong: Insurance Innovation for Transition Resilience.
We were joined by two experts - Amar Rahman from Zurich Resilience and James Bosely from Gallagher. What followed was a refreshingly blunt conversation about how the insurance world is quietly considering the value of our assets.
Here are the four key takeaways that every property professional should have on their radar right now.
1. Short-Term Policy vs. Long-Term Risk
Amar made a point that stuck with me: while we often talk about hazard and risk, we should be looking at the exposure of the entire value chain, not just the physical asset where an initial loss might occur.
Interestingly, while insurers are doing immense research into climate change and long-term adaptation, the actual products they sell are short-term (usually a maximum of 3 years). They have their eyes on the next 30 years of climate shifts, but they only ever “bet” on your building for the next couple. And then Amar said “Adaptation is hard, but mitigation is easy” as he explained he is seeing the rise of the “Chief Adaptation Officer” because simply tick-boxing with mitigation might not be enough to guarantee future value.
2. Parametric Insurance: The “Alternative Risk Transfer”
James Bosely introduced a concept that I think we’ll be hearing a lot more of: Parametric Insurance.
Technically, it’s an “alternative risk transfer” rather than traditional insurance. Instead of the long, painful process of validating a loss and being “made whole” again, a parametric product pays out instantly when a specific trigger (or parameter) is met - think wildfire, flood level or a cyber-attack.
It’s not about the actual loss, it’s about the event. The payout is simpler, quicker and provides liquidity exactly when you need it. So as traditional insurance becomes harder to get for climate-related risks, these parametric models will likely step in to fill the gap.
3. A Soft Market is a Window for Innovation
If you’ve been sitting on a new material, a new system, or a PropTech innovation but were worried about the insurance hurdle, now is the time to move.
James explained that the market is currently “soft,” meaning there is a better appetite for deals. And another tailwind is that Lloyd’s has introduced new underwriting codes (ICX/TCX) specifically for innovative products, alongside a principles-based oversight approach. what does this mean?… they are becoming more sensible about looking at startups and new materials that don’t have 50 years of testing data but do have a solid logic behind them.
4. Is it Time for a Real Estate Captive?
We briefly touched on a big question: should the industry form a “Captive”?
In simple terms, a captive is an insurance company that is wholly owned and controlled by its insureds - in this case a group of real estate players. Its primary purpose is to insure the risks of its owners. Could this be the way to unlock innovation? If the traditional market is too slow to understand a new low-carbon material, could a Real Estate Captive provide the cover needed to gain traction? I don’t have the answer yet, but it’s a space I’ll be watching very closely and perhaps this will be an idea to pursue coming out of the breakfast event.
The Bottom Line
Insurance is often seen as a grudge purchase, a necessary evil at the end of a spreadsheet. But as James pointed out, insurability equals value. If your building isn’t insurable in ten years’ time, its value drops today. Interestingly, your premium for next year’s policy won’t tell you how rosy that outlook is, but the team at the insurance company may have a pretty good idea of the trajectory your asset is on.
It’s a good time to be talking to your insurers. Don’t wait for the renewal - start the conversation now about adaptation and innovation while the market is in your favour.