Climate change risks and opportunities

The Generali Group views climate change as a source of risk, on one hand, and opportunity, on the other, for the running and development of its business. From this viewpoint, it analyses the possible consequences of climate change in the short, medium and long term, to identify the risks for which suitable mitigation measures must be adopted, and the opportunities to develop business and improve efficiency.

The Group constantly monitors the evolution of climate change risks, also using special stochastic models for simulating natural phenomena to verify the adequacy of both the mitigation products and the risk management tools. The Group is also committed to investing in research and studies on these issues. Specifically, for four years, Generali France has funded a university teaching position for the study of climate change.

Given the recent evolution of the climate and that forecast for the future, the following three categories of risks linked to climate change have been identified:

  1. Risks relating to changes in climate factors - The main area of increased risk which can already be seen is the greater frequency and scope of catastrophic events caused by storms and flooding, which has increased the cost of claims and reinsurance, both in the life and nonlife lines of business, and a resulting significant increase in premiums, with possible future repercussions in terms of difficulty for customers to access insurance, as well as insurability. The increase in average temperatures has also been identified as a possible cause of the increase in catastrophic events in relation to the risks of death/ morbidity, with consequences in terms of the cost of claims, premiums and insurability, in the life and health lines of business.
  2. Risks linked to changes in regulations and/or standards - Over the long-term, this entire area is considered to be a source of potential strategic risk, which may involve both the business model and revenue flows. Over the next few years, it can be assumed that changes in local and national laws concerning energy efficiency in buildings may result in part of the Group's property assets becoming obsolete, with consequences in terms of a reduction in the demand for leases by the top-end market segment (which is the main target of the Company) and/or outlays related to the introduction of a possible carbon tax. Similarly, new local or national laws relating to greenhouse gas emissions of vehicles could result in a decrease in the operating fleet and, as a result, in the demand for car insurance. Lastly, the increase in the frequency of catastrophe claims due to natural events could lead to the introduction of certain types of mandatory insurance, with an increase in the Company's exposure, to be assessed primarily in terms of concentration of risk, as well as frequency.
  3. Other risks linked to climate changes - In the next few years, growing awareness of issues related to climate change is expected to influence consumer behaviour, resulting in an increase in demand for ecoefficient buildings and eco-sustainable transportation. Lastly, reputation risk is identified in relation to delays by the Group in adopting measures to limit the effects of climate change or to effectively respond to widespread concerns of the public.

The increase in exposure to climate change risk over the next few years could also result in opportunities, which have been identified in the following three categories:

  1. Increased use of insurance - The confirmation of new behaviours, deriving from greater attention to environmental subjects, may require that the Group develop new products, processes or innovative approaches, which could offer opportunities for growth and increase business efficiency.
  2. Development of innovative channels for the distribution of products and/or provision of services to customers - The development of distribution channels which exploit new technologies (email, smartphones, tablets, etc.), with a view to environmental protection also provide opportunities to be captured for business growth. To this end, it is important to build and disseminate an image of the company that is highly engaged in environmental issues, capable of attracting customers, investors, partners (Suppliers, NGOs, institutions) and talent.
  3. Investments in new technologies - The constant need to satisfy the increased demand for energy from entire countries or companies requires increasingly large investments in new, more sophisticated technologies, which, over time, could also result in significant profitability. To this end, the Generali Group is supporting, through private equity initiatives, several companies operating in the renewable energy sector. Specifically, through Generali Real Estate, the Group is committed to supporting two initiatives for the generation of energy from renewable sources in Italy with an overall investment estimated at 40 million euros and a total installed capacity of about 28 MW on completion of the project, 49% of which from solar energy, 24% from wind energy and 27% from biomass.