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At R&R Conference we heard the representative of a major mutual insurance company talking about Resilience, sustainability and insurance.
Resilience was defined as the ability to recover after an accident, the ability to withstand disruption and rebound quickly.
The talk also discussed sustainability as it was defined by the UN in 1987. The UN Brundtland Commission was officially dissolved in December 1987 after releasing Our Common Future. The text, also known as the Brundtland Report, coined and defined the meaning of the term “Sustainable Development”.
Following that report, sustainability is a long term commitment to meet the needs of the present without compromising the ability of future generations to “survive”.
Following these definitions if a system is resilient, when it suffers an accident, it will limit its losses. There will be less destruction resulting from the accident. Thus it will be more sustainable, as the damages to the environment, total carbon footprint, including the accident’s own, will be smaller.
Resilience, sustainability and insurance actually meet in a sweet spot where one can be mutually optimize them.
Accidents, when they occur, impact on every aspect of a business:
One can see good case histories of these wide-spread consequences, for example in:
Reportedly the carbon foot print of catastrophic failure like the ones above is very significant and can add up to 14% of the lifetime carbon footprint, if effective fire protection is not in place when a fire accident occurs. Environmental consequences vary widely, but firemen are known to use 30 times more water than sprinklers, and the water they use can be severely contaminated and flow freely towards water courses or water bodies, spreading contamination, like it was the case in Basel, Switzerland, during the fire at Schweizerhalle in 1986.
Once again it was stated that companies that have very strong risk management yield stable performance, are significantly less volatile than the others, and losses are generally way smaller than for less prepared companies.
Resilience, sustainability and insurance do actually meet in a sweet spot where they help optimizing insurance contracts, enhancing resilience and achieve long term sustainability goals.