Willis Research Network says managing extreme risks is key to sustainability, financial security and poverty reduction

MarketWatch via Business Wire: The scientific models used by the insurance industry to assess the financial risks of extreme weather events could help governments and aid agencies develop new approaches for sustainable development and poverty alleviation, according to Rowan Douglas, Chairman of the Willis Research Network.

Addressing delegates at the World Bank's inaugural Understanding Risk conference, held June 1-4 in Washington, D.C., Mr. Douglas said that the methods employed by insurers to model extreme risks could be the key to helping the world's most vulnerable communities cope with the social and economic impacts of floods, droughts and other climate-related threats.

"We tend to manage for normality, but it is the extreme events that often matter most," said Mr. Douglas. "Whether it's in our financial institutions, societies or environment, sustainability is achieved by avoiding or managing the impacts of undesirable extremes within tolerable parameters. Therefore, we are proposing a new lens through which we look at the issue of sustainability, one which repositions the fundamental concepts and roles of insurance at the heart of delivering sustainability, financial security and poverty reduction," said Mr. Douglas.

During his closing keynote speech, Mr. Douglas illustrated how the tools, models and techniques used to help insurance companies sustain 1-in-200-year shocks could help deliver sustainability and financial security, and combat poverty in those regions most at risk to extreme weather. The idea of extending insurance concepts of extreme risk modeling and risk sharing across finance, development and other sectors comes at a time when the world's leading development and aid organizations are searching for new solutions to prepare poor nations and emerging economies for future catastrophes….

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