For insurers, the question isn’t whether to change, but how quickly

By Pierre du Rostu (pictured left), CEO of AXA digital commercial platform and Berend de Jong (pictured right), global insurance and finance lead at Planet.

Recently, the EU Agency for the Space Programme (EUSPA) and the European Insurance and Occupational Pensions Authority (EIOPA) published a white paper that examined how Earth observation data could be used to assess the impact of natural catastrophes. 

Arguably, their hand was forced; the world is getting hotter and disasters stemming from the changing climate are becoming increasingly frequent, grave and expensive to address. This, as the EUSPA/EIOPA press release puts it, calls for “more effective risk management and greater resilience through the deployment of innovative solutions”.

What satellite Earth observation can do

Earth observation (EO) is certainly one such innovative solution, especially today. Satellites circle the planet on a daily basis, capturing terabytes of imagery that, after being sent down to Earth, are fused, processed, synthesised and ultimately converted into solutions that private companies and public entities can utilise. 

All this takes place in near real-time, which is essential in an age in which catastrophes are at once more difficult to predict and increasingly devastating.

Traditionally, insurers have relied on historical data to make informed assumptions about how likely an event is to happen, and how grave it will be. But such a model works best when the world is broadly stable and, at risk of stating the obvious, it isn’t. 

The upshot is that in some parts of the world, insurers are, to quote a New York Times piece from 2024, “deserting homeowners”. The phrasing casts insurers as abandoning those who need them, but the fact is that insurers operating on the old model find themselves between a rock and a hard place: forced either to raise premiums sharply or cease to provide coverage for climate-related risks. EO can evolve this model – helping forge a better, more controlled and new way forward.

Facing up to risk

Forward-thinking insurers have sought out EO companies and are actively using the data and insights they provide to cover climate-related risks. However, other insurers are more wary. That hesitation is justifiable; they’re mindful of the cost of adoption, integration and of changing a model that, until relatively recently, worked perfectly well.

But if it’s true that insurance is a risk-averse sector, then insurers must understand that the real risk that faces them isn’t embracing the technology of tomorrow; it’s staying where they are.

Swiss Re recently predicted that insured losses from natural catastrophes are likely to climb to ‌about $148 billion this year. There is a broad consensus among climate scientists that climate change is worsening natural disasters. Given that the world is getting significantly hotter, there is an urgent need, across the insurance industry, to change tack.

This is relevant for captive insurers. Captives are often created when commercial cover is expensive, narrow or unavailable, which means their owners need a clearer view of the risks they are choosing to retain. Earth observation data can help corporate risk managers and captive boards monitor exposed assets, understand changing natural-catastrophe risk, support better reserving and validate losses more quickly after an event. In that sense, EO is, effectively, a governance tool for companies taking more control of their own risk. 

Resilience and flourishing

Perhaps “change tack” isn’t the right way to put it. Because what the world needs from the insurance sector isn’t a revolution, but an evolution of what insurance can be. As society’s safety net, insurers have long maintained the conditions for individual and collective flourishing.

Insurance can provide an environment where people are able to take more risks, which is essential to innovation and economic activity, especially in a more volatile world, where a wrong decision can be catastrophic and fewer people feel safe. 

Insurers working hand in hand with EO companies can both expedite claims-processing so that individuals can bounce back quickly in the event of disaster and furnish company executives with the precise, real-time knowledge they need to take intelligent risks. Both benefit the wider community.

In an uncertain world, insurers have a key role to play. In order to play it, they must turn to the latest technologies and embrace the tools shaping the future. Sound action starts with having the right information and the timely, precise, real-time insights supplied by EO companies are just what insurers need to continue to be confident and productive despite the widespread volatility. 

This cross-sector collaboration – between tech and insurance, insurance and industry – is what the present situation demands. It won’t stop the world getting hotter, and there will always be risks so great they cannot be covered. But it can make the world more resilient.

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