Kuala Lumpur, April 2, 2024
Floods The Main Environmental Risk In Malaysia, Says Zurich
Floods will be the main environmental risk in Malaysia this year at a time when a large majority of homeowners lack insurance coverage for damage from being inundated, Zurich Malaysia cautioned.
Zurich Malaysia chief risk officer Teresa Wong said that environmental risks have also impacted the insurance industry.
Based on the survey by Zurich Malaysia in 2021, 74% of homeowners lack protection against flood damage, indicating “significant gaps in flood insurance coverage across the nation, further compounded by a lack of awareness about coverage for home content and other potential losses,” she said.
The 2021 massive floods, which affected 11 states in Malaysia, resulted in the largest claims payout by the industry for a flood event in a decade, with about 36% of the overall losses covered by insurance.
The insurance and takaful industry spent about RM2.2 billion on flood claims during the 2021 floods with overall economic losses estimated at RM6.1 billion, according to a study by Bank Negara Malaysia.
The study highlighted the floods exposed significant underinsurance of flood risks, particularly among households, despite higher level of coverage when compared to earlier periods.
Even in flood-prone areas in Malaysia, only 16% of the motor comprehensive insurance policies cover flood, the study flagged.
Worldwide, the Global Risk Report 2024 — a collaborative report between World Economic Forum and Zurich Insurance Group — also found that environmental risk continues to be at the forefront of the risk landscape.
The report presents the findings of the Global Risks Perception Survey which captures insights from some 1,500 global experts.
It highlighted that two-thirds of the respondents ranked “extreme weather” as the top risk most likely to present a material crisis on a global scale in 2024, said the report, as the warming phase of the El Nino weather conditions projected to intensify and persist until May this year.
Extreme weather is also seen as the most severe risk after artificial intelligence misinformation and disinformation over the two-year time frame among the respondents.
The Zurich Group, which includes its Malaysian entity, is taking its sustainability commitment seriously as it believes that it has a direct interest in sustainable global economic growth and in supporting communities to become more resilient to environmental and social challenges.
Zurich Malaysia is part of Zurich Group’s commitment to build an impact investment portfolio that helps to avoid five million tonnes of carbon dioxide emissions per year, and, separately, “makes a positive contribution to the lives and livelihoods of five million people,” said Wong.
The group has set targets to achieve net-zero in their operations by 2030 and net-zero in its investments and underwriting by 2050.
Currently, Wong says that the group has a de-risking programme and spends time engaging with high greenhouse gas-emitting asset owners to understand transition efforts and deliverables. “Normally these conversations go over a few years,” she noted.
She also said that Zurich Malaysia is on track with regards to its green investment policy, but declined to divulge further on the kind of returns its green investment makes.
Wong also highlighted that the local market does not have sufficient green equity or bonds for institutions looking to invest in such assets. The fastest way to grow a pool of green assets, she said, is through financing green projects.
“Sustainability is not about just us wanting to invest in green assets, but it’s also about what’s available. If we only look at profit and returns over the asset, it won’t work,” she stressed.
When asked if the insurer’s profitability has seen impact as a result of its de-risking from polluting industries, Wong replied: “We’re a conservative company. There has been no impact as yet on our net investment income from how we have invested in the past and how we will invest in the future. We’re not aggressive in terms of risk appetite.”