Climate-driven insurance challenges are front of mind for many industry stakeholders in 2025. More than ever, brokers are involved in these issues - including for clients with properties impacted by fire and flood or company directors concerned by their liabilities under new climate regulation.
“With the increase in frequency and severity of nat cat events, secondary perils, including flood, hail, and extreme rainfall, are more of a focus than ever before,” said Lynn Roehrig (pictured above, left). “From what we’re seeing, these weather events are becoming more extreme due to climate change, urbanisation and urban sprawl.”
Sydney-based Roehrig is head of business development in Australia and New Zealand for Descartes Underwriting Australia, a firm offering parametric insurance.
In Adelaide, underwriter Kirsten Mooney (pictured above, right) is also focusing on climate-driven threats.
“For us, the biggest challenge in the coming months is the possibility of a dry year reducing farming yields which could lead to rate reductions based on reinsurance profitability and potential reduced market size,” she said.
Roehrig suggested that one positive feature of the year ahead is how industry stakeholders, including brokers across the corporate, government and middle market sectors, are now better educated to help clients use parametrics to help deal with these risks.
“I feel the parametric world has greatly expanded over the last couple of years and has become a mainstay of the insurance world,” he said. “I have much faith and excitement about how the product and solutions will evolve over the next few years.”
Roehrig said since his Paris-headquartered firm established an operation in Australia four years ago, he has seen this insurance alternative getting more traction as an important tool for managing climate risk.
He also mentioned a client that has seen repeated flood impacts in recent years. For these customers, conventional insurance is often unavailable or too expensive and parametric offerings can be one of the few viable options for softening loss impacts and protecting the business.
Descartes, he said, provided a customer with a new parametric cover option last year which uses radar technology to measure flood heights.
Roehrig said, for him, a feature of implementing this offering was how it brought together different industry players.
“This solution bought together best-of-class underwriting and technology through the collaboration of the client, broker, underwriter and insurer that was imperative to make it a success,” he said.
The Insurance Council of Australia (ICA) has repeatedly called for more industry, government and community co-operation to better meet climate threats.
Roehrig said parametric cyclone offerings are also making some headway in Australia’s northern regions.
“Descartes also had success educating brokers and clients on parametric cyclone insurance in North Queensland and the Northern Territory, providing coverage to clients who were unable to find suitable insurance solutions for the risk,” he said.
Karen Hardy is an insurance broker in northern Queensland who has also made progress with her parametric offering. Harding, managing director of Redicova, focuses on parametric offerings for sugar cane and banana growers. She said until parametrics, these farmers had no crop insurance protection against cyclones.
Roehrig said this alternative coverage is continually evolving.
“We continue to develop new covers globally with the support of our people with expertise in meteorology, climatology, physics, R&D, DevOps, data science and underwriting,” he said. “Not only covering first level perils such as cyclone and earthquake, but also secondary perils such as flood and hail.”
In New Zealand, Descartes has offered parametric coverages since 2019.
Roehrig said three years before that, the 2016 Kaikōura earthquake was a “market mover”. He suggested this event helped push industry stakeholders towards more adoption of parametrics.
For Mooney, despite the climate issues ahead, 2025’s insurance market is looking more positive than last year’s.
“Our biggest insurance challenge last year was capacity and market restrictions but also ensuring we retained the required technical rate setting in a competitive market environment,” she said. “The slight softening of the reinsurance market allowing further emergence of MGA capacities was positive for the industry last year, I think.”
Her firm is also deploying a new crop insurance offering that could help. Developed by DAS (Digital Agriculture Services), the offering uses machine learning, automapping and geospatial data to improve the accuracy risk assessments. A DAS launch announcement described it as a “geospatial crop insurance solution”.
"We devised it with the goal of preventing premium leakage, reducing mistakes in policy issuance, minimising fraud and speeding up claims," said DAS’s Melbourne-based CEO Anthony Willmott in the announcement. "Australia is our first market for this solution with plans to scale it globally.”
What’s your insurance firm doing to better meet the increasing challenges of climate risks? Please tell us below.
