On the occasion of the 3rd Security & Resilience Forum organized by WE DEMAIN on October 25 at the General Directorate of the National Gendarmerie, Estelle Guyon Abinal, Secretary General of AXA France, took part in a round table which addressed a crucial question in the light of global warming and all the disruptions that result from it: “Are environmental risks still manageable?”
According to a report by France Assureurs on the impact of climate change by 2050, the cumulative cost of drought risk alone for insurance companies should drop from 13.8 billion euros cumulatively over the period 1999-2019 to 43 billion euros. euros for the next 30 years. The Forum was the occasion for WE DEMAIN to have an in-depth interview with Estelle Guyon Abinal on the future of the insurance business.
WEDEMAIN: How is AXA getting ready to tackle climate change?
Estelle Guyon Abinal: As an insurance company, we have an impact on the climate in three ways: insurer, investor and employer. On the one hand, as an insurer: how do you respond to a customer in a disaster situation, including if it is linked to climatic risks. In this context, we prefer to be in the action upstream than in the simple reaction. An insurer not only manages risks, it also helps to prevent them.
This is why we are developing what we call “green business”, ie we imagine products and services with a positive impact on the environment. More interesting insurance products in terms of prices for driving an electric vehicle, the incentive to use reused parts for vehicle repairs, etc. For companies, we will also encourage them to make repairs that will reduce their carbon impact. For example, a company that would like to change its heating following an incident will benefit from financial aid to equip itself with geothermal heating rather than reinstalling oil heating.
And as an investor?
An insurance company has significant financial assets. This is counted in hundreds of billions of euros [600 milliards d’euros pour le groupe Axa, ndlr]. On this, we have very specific objectives to promote green investments and support companies in transition. We were also the first to exit from the coal industry as an investor in 2015 but also from oil and oil sands in 2017. In 2021, we have further reduced our list of business sectors in which we agree to invest to promote the overall reduction of our carbon footprint.
Finally, what are your initiatives as an employer?
AXA has invested in low-carbon buildings, hybrid or electric car fleets, etc. Since 2012, we have reduced our carbon footprint by 60%. And we have the objective of reducing it by another 20% by 2025. And to this initial objective, we have recently added the energy sobriety objectives encouraged by the government.
Today, in France, 100% of our sites run on renewable energy, green electricity. We are also working to reduce the energy impact of all our data centers and IT equipment (storing fewer emails, turning off screens that are not in use, etc.).
Faced with climate change, how do you anticipate major changes to prepare for developments?
As an insurer, we are there to support and influence changes in society. This has always been the case in history. It was because there were insurers who agreed to support shipowners that it was possible to charter large ships and that world maritime trade took off from the 17th century. In the 1950s, it was because there were insurers and reinsurers who were able to pool their financial capacities within the Assuratome pool, that the risks linked to civil nuclear energy became insurable and that the France was able to increase its energy independence with the construction of nuclear power plants.
Third example: in 1982, France implemented the CatNat scheme [catastrophes naturelles, ndlr]. It is a partnership between insurers, reinsurers and the State and which allows the management of natural disasters (flood, drought, etc.) in extremely specific cases, with an extremely supervised mechanism. This notably involves an order pronouncing the state of natural disaster after consulting an inter-ministerial commission which ensures the neutrality and homogeneity of the notion of natural disaster.
In these three examples, and there are many others, we see that pool mechanisms, possibly integrating the State, make it possible to deal with large-scale events that would otherwise be uninsurable, and therefore make it possible to better support society and the economy.
What will happen if there is an imbalance and a multiplication of these natural disasters?
Insurance is a mechanism based on the pooling of risks: many people pay a small sum to be covered against a disaster that happens very infrequently. If the proliferation of natural disasters causes us to move from rare disasters to more massive forms, but with a very high cost, we could find ourselves in a situation that could become uninsurable. A risk that becomes systemic is no longer insurable. For now, intermediate solutions like CatNat are still holding up. Everything must be done to prevent this risk from becoming systemic. This involves public/private partnerships, individual prevention and long-term actions to act for the environment and in particular to reduce CO2 emissions.
Today, we are not yet in the case where risks are no longer insurable but this is indeed part of the reflections. Initially, the solution will be to adapt the premium [le montant à payer par le particulier ou l’entreprise pour être assuré, ndlr]. Tomorrow, if a risk becomes so high in one place that it is no longer bearable by an insurer alone, one could imagine having compulsory insurance arrangements and concerted actions between exposed persons, insurers and reinsurers, and public actors. And this also involves realizing that certain areas, such as floodplains, should no longer be inhabited. We need PLU (Local Urban Plan) established and applied more rigorously than what has been done in the last 50 years.
Are there any common prospective reflections between insurers and the State on these issues?
Sure. The insurance business is a long-term business. I would like to talk about an example, which concerns one of our fundamentals, namely agriculture. Today, in the face of climate change, in the face of increasing hailstorms with serious consequences for harvests. The State, insurers and farmers (via the FNSEA) are working together to create a long-lasting, viable and sustainable system, in which each stakeholder will be an actor.
First of all, farmers will be strongly encouraged by a subsidy mechanism to insure their crops because hail is too frequent a risk for them not to protect themselves against it. Secondly, insurers and reinsurers will be able to collaborate within a pool. Third, when claims exceed a certain level, there will be state intervention.
At the global level, how do you act to influence the reduction of greenhouse gas emissions?
AXA has just published for the 9th consecutive year a very comprehensive report, the Axa Future Risks Report, to point out the future risks of tomorrow and reflect on how to deal with them. Unsurprisingly, climate risk appears at the top of the rankings as for the previous 5 years, but what is new this year is that it is number 1 according to experts from all regions of the world, particularly the United States. This realization is encouraging, but action is needed.
AXA was behind the creation of the Net-Zero Insurance Alliance (NZIA), officially launched in April 2021 within the UN Environment Programme. It includes some thirty companies, including two major French players, AXA and Scor, one of the world’s largest reinsurers. At NZIA, we are committed to making our client portfolios Net Zero carbon by 2050. The goal is to have enormous leverage to act upstream and influence the companies we insure.
They must now sign a four-page charter committing them to the ecological transition. For our part, we are committed to supporting them in this process. But that’s not wishful thinking. If three quantified objectives are not achieved within the time limits, then these companies will no longer be insured by AXA or one of the members of the NZIA. The aim is to encourage these companies to change radically, otherwise they will no longer find an insurer in the medium to long term. It is anything but trivial. Faced with the challenges of climate change, the disappearance of biodiversity and environmental protection, insurers have a major role to play.