Interview with Denis Duverne, IDF: how the insurers' forum aims to crack climate change

COP26, the United Nations (UN) Climate Change Conference to be held in Glasgow on November 1 to 12, 2021, is a key event in the calendar for the Insurance Development Forum (IDF).

Ahead of the high level event, the industry-led public-private partnership (PPP) is in “full implementation mode” to deliver its plans to tackle climate change and its impacts.

By using insurance and its risk management capabilities to build greater global resilience and protection, Denis Duverne, IDF chair and chair of the board of directors at AXA, said he’s excited to see the difference the body can make after it marked a major milestone in 2020.

The IDF was formally incorporated into the UK after it created a legal entity in the jurisdiction. This gives the body more independence, greater flexibility and makes interactions with its partners easier than before, Duverne explained.

In an exclusive interview with Intelligent Insurer’s Reinsurance Lounge, Duverne discussed the IDF’s goals and challenges for 2021 and how the body plans to build on a surprisingly industrious 2020 in spite of the pandemic.

“The IDF wants to see the impact we can have on the industry. The markets that are most affected by climate change are emerging markets,” said Duverne. Emerging markets have a very low insurance penetration and therefore bringing resources in terms of risk management capabilities and insurance programmes that can cover them is very important, he added.

Five goals ahead of COP26

In 2021, the IDF, which was officially launched in 2016 by leaders of the UN, the World Bank and the insurance industry, is focusing on five areas ahead of COP26.

First, risk modelling is key, Duverne said. “In emerging markets affected by climate change the quality of data on risk is relatively poor and the private models that are usually available for a fee don’t have a great level of granularity.”

In response, the IDF has been building its risk infrastructure which is focused on the interoperability of systems and open data standards.

“A global earthquake model was built as a pro bono facility a few years back, and we are similarly looking to build something on climate risk, which could be further developed post-COP26.”

The skeleton or the core of a model would be ready for the meeting and “be made available to all”, Duverne explained.
The idea is that countries could map their public assets—their various infrastructure assets for example—and gradually the IDF would build up this data to create a model, which would be further developed based on the core the organisation is building for COP26.

The second goal involves working with the UN Environment Programme finance initiative, Principles for Sustainable Insurance (PSI).

Duverne said that together with the UN, the IDF plans to launch the Net Zero Insurance Underwriting Alliance. “This would most likely be led by AXA to align our insurance portfolios with the objective of net zero carbon contribution to global warming by 2050. This is a significant endeavour and we want to progress between now and COP26.”

A third goal involves getting the IDF’s Sovereign Tripartite Agreement with the UN Development Programme (UNDP) and the German Federal Ministry for Economic Cooperation and Development up and running.

The tripartite agreement was signed in 2019 with the aim of protecting the populations of 20 countries. The industry offered $5 billion of insurance and reinsurance capacity and the IDF and its partners agreed to cover 20 countries in the next five years.

The tripartite programme of work aims to increase insurance protection in climate-exposed countries in line with the InsuResilience Global Partnership Vision 2025 goals. Under the plans, the programme will provide technical assistance and risk solutions to 20 climate-vulnerable countries by 2025.

Work to turn agreement plans and concepts into measurable initiatives began in 2020 with the establishment of a programme called the IDF Programme Coordination Unit.

Peru has signed the first country agreement, which covers 50,000 public schools. In 2020, the list of 20 countries for the IDF, insurance industry and the public sector to focus on was agreed.

“For each country the body has assigned two or three insurers, reinsurers or brokers, so that there is potential coverage, and we are progressing the discussions with the governments, moderated by UNDP and the German government if needed,” Duverne said.

“This year, we expect to have at least five active in-country projects demonstrating that this is working,” he added.

He could not yet name the countries and projects that will be announcing their involvement this year. “I have a list of more than five and expect that at the end of the year we will have more progress than five,” he explained, but added that “confirmation was very dependent on the country government partners because it’s very difficult to anticipate the ability to gather and be ready for a signature because it is a very political decision at the country level.”

The fourth goal to hit ahead of November’s meeting in Glasgow is around inclusive insurance. Duverne explained that the IDF wants to launch in at least one or two countries with two specific inclusive insurance programmes covering those countries.

The fifth goal is centred on insurance investments and how they can make a difference in tackling climate change. “We have the objective to develop specialist vehicles that would facilitate the investment by insurance companies in emerging market infrastructure,” Duverne added.

The pre-COP26 goals are the main focus for this year, he said, adding: “We are aiming to have visibility. We are very engaged with Mark Carney, the UN special envoy for climate action and finance and the UK Prime Minister’s finance adviser for COP26, his team and his climate finance agenda.

“We speak on a regular basis, and COP26 is our aim for the end of this year.”

COVID-19 moves the dial

As the IDF launched its report “2020 in review”, in January 2021, Duverne said the “pandemic has exposed the weakness of the current disaster risk funding systems”.

“I shouldn’t overstate the capabilities of the industry vis-à-vis a pandemic such as COVID-19. Clearly this pandemic was quite unique because of its global effect and for the first time the world reacted completely differently from previous pandemics with the lockdowns, which increased and worsened the economic impact of the pandemic.

“It’s becoming a systemic risk, which on its own the insurance industry cannot cover,” he said.

“One of the implications of COVID-19 has been that the poorer populations in mature markets and emerging markets were disproportionately more affected than the more affluent parts of the population, and this has increased the protection gap across the emerging markets.”

Returning to the IDF’s work on inclusive insurance initiatives, he said that initially, given the focus of the body on climate change, the programmes that were envisioned were around protection against climate events.

“In reality when you look at the most exposed populations one of the first needs is protection against the events of life such as sickness, and hospitalisation. The coverage we have cannot be centred only on climate events.

“We also have to offer within those programmes protection against sickness and health-related issues. It has caused us to look at the situation in a slightly different way but at the same time you cannot imagine that when planning for a pandemic everything could be covered by the private insurance sector,” he said.

Get involved

Duverne was clear that more input from across the insurance industry would be welcomed.

In a call to action for industry professionals he said that the only way to contribute would be to get involved with the IDF and one or more of its five working groups.

“You cannot raise your hand if you don’t know what’s going on. We have multiple opportunities for public and private sector entities to contribute.

“We don’t have enough contribution in a number of areas, so for the organisations that are not yet involved there is still a lot of room to be involved and contribute to those programmes.”

In 2020, the body had more than 100 people engaged in its working groups “so the visibility of the IDF has clearly been enhanced”, he added.

Although 2020 was a challenge because the IDF worked entirely remotely, with physical meetings in April and September in Washington DC and New York replaced by videoconference, the IDF was more active than ever.

“COVID-19 didn’t stop our activities, in fact the demand increased rather than decreased,” Duverne said.

The key message, he explained, is that low insurance penetration in emerging markets—aka the protection gap—is something that can be covered only with collaboration between the public and the private sectors.

“There is now a global agreement of economists that insurance is a condition for development and not a consequence of development.

“Therefore, bringing additional resources so that there is better insurance protection and risk preparedness in emerging markets will happen only if there is closer collaboration between the public and the private sectors.

“I believe this needs to be understood from our public sector partners and members of the private sector, so I encourage further dialogue. The IDF is the ideal platform for that.”

To view the full Re/insurance Lounge session  click here.