Satellites and climate change: new eyes for insurers

Vol: 43 Issue: 4 | Dec 2021

Climate change represents one of the greatest risks to the future of the planet. 

For the first time in the 15-year history of the World Economic Forum’s Global Risks Perception Survey, environmental concerns dominate the top five likely long-term risks.

For an industry like insurance, which is focused on measuring and mitigating risk, climate change represents a significant threat. But as the earth continues to warm, more insurers are turning to space for ways to address the challenges.

Ranging in size from a shoebox to a school bus, satellites can monitor the climate from their position within or just above the earth’s atmosphere and deliver vital information to help address climate-related risks.

There are currently about 162 satellites in orbit that measure various climate-change indicators. Satellite radar altimetry, for example, gives precise information about sea levels and wave heights by measuring the time taken for a radar pulse to travel from a satellite to the earth’s surface and back again. 

Satellites can also use advanced infra-red radar imaging to detect fires in remote regions and send location details directly to land managers worldwide within hours of the satellite overpass. 

This data is increasingly being used by insurers to monitor physical changes in the environment, with the aim of helping customers manage risks and facilitate efficient insurance coverage through better underwriting and pricing of risks.

ADDRESSING CLIMATE RISK

Dr Marta Yebra, senior lecturer in Environment and Engineering at the Australian National University (ANU) College of Science, says satellite technology has evolved significantly over the past decade.

‘Globally, the technology really picked up when NASA opened its archive of Landsat imagery [in 2008] and made it free for anyone to access,’ she says. 

‘This helped to calibrate new models, and remote-sensing science made huge progress. It also changed how satellite data could be used for many applications.’

Yebra and her colleagues at ANU are developing new satellites to help pinpoint how bushfires start and spread [see breakout far right].

Meanwhile, in sectors such as agriculture, satellite data is providing early assessments of the potential impact of drought and floods [see breakout left]. 

Scientists can monitor rice growth patterns and anticipated yields and, in the event of a disaster, the before-and-after images enable insurers to perform loss assessments for more efficient claims management for the affected farmers.

‘Satellite technology can detect crop stress and help to protect the agriculture industry,’ says Rade Musulin, principal and head of the climate risk practice at consulting firm Finity. 

‘It can detect the soil moisture on the ground and then pay claims to farmers based on the lack of moisture, instead of having to send an inspector to assess the crops.’

BENEFITS FOR INSURERS

For insurers worldwide, collaboration with technology firms is proving a valuable way to better understand climate-related risks.

Insurance giants such as MS&AD Insurance and QBE, for instance, have partnered with US-based predictive climate data and analytics company Jupiter Intelligence to help them assess and manage risks.

Jupiter CEO Rich Sorkin says his company is currently working with almost half of the world’s top 10 property and casualty insurance firms, several of which have a significant presence in the Asia-Pacific region.

‘MS&AD, for example, is working with its clients to evaluate their risk exposure over a climate time horizon in collaboration with the Japanese Government, which is pushing pretty hard on this issue,’ says Sorkin.

In Australia, IAG Firemark Ventures recently invested in technology start-ups like Digital Agriculture Services and Arturo to leverage climate data and imaging.

The company’s general partner Scott Gunther says the investments help IAG to experiment and ‘create new and innovative experiences’ for its insurance customers.

‘Data and insights from satellite or any form of aerial imagery provide new ways to understand and assess risk,’ he says.

‘Our investment in Digital Agriculture Services will help us better understand agriculture and climate risks using data and location insights from satellite imagery and unique data services. 

This will help empower agriculture customers with emerging data and insights about their property and assets and the risks associated with their farms.’

Gunther adds that the investment in artificial intelligence property analytics company Arturo will provide new ways of understanding residential property risk.

‘By using satellite, aerial and drone imagery to deliver accurate property information in real time, this technology has the potential to reinvent how we help our customers during major weather events like floods and bushfires,’ he says.

OPPORTUNITIES ABOVE THE CLOUDS

David Kells, national sector leader, insurance, at KPMG Australia, says the growing use of satellite data is an indication of the industry’s increased willingness to embrace technology.

‘If you look at the innovation curve, insurers have generally been at the lower end of it,’ he says. ‘But I think there’s definitely been an acceleration of thinking in recent times, and a lot of this ties to the whole idea of prevention versus protection. This also links back to a greater use of technology, which includes satellites.’

As technology becomes more advanced, insurers can expect a greater understanding of climate risk, says Sorkin.

Jupiter’s ClimateScore platform, for example, draws on a range of climate data from sources, including satellite observations, to provide analysis from one hour to 50 years in the future. Its metrics measure the risks of hazards such as flood, wind, heat, fire, drought, hail and earthquake.

Sorkin says the modelling starts with a simulation of the current risks using the existing terrain and weather data.

‘The observational data and modelling for this is vastly more sophisticated than it was even 10 years ago,’ he says. 

‘The computer power that’s available for that simulation is also much better. In many cases, we’re actually outperforming the risk models that insurance companies are using today, and customers have validated that for us against their own loss history.’

With the risks from climate change growing as the planet continues to warm, Gunther expects more insurers to tap into satellite data to manage the challenges ahead.

‘By understanding how risk, including climate risk, is changing and evolving over time, customers and communities will be better informed to make decisions to prepare and mitigate risk, while protecting their assets through insurance.’ 

HOW SATELLITES ARE MONITORING CLIMATE CHANGE

• Dwindling ice covers
• Rising sea levels
• Greenhouse gas emissions
• Deforestation
• Ocean pollution
• Coral reefs
• Desertification

SATELLITES RESCUE SMALL FARMERS IN VIETNAM

Satellite technology has helped pave the way for a new national agricultural insurance scheme in Vietnam.

A public-private partnership between several organisations, including Swiss Re, uses satellite technology to monitor rice-planted areas, rice growth and damaged areas. They can also estimate paddy rice yields and enable swift payouts for farmers in need.

The partnership, RIICE (Remote Sensing-based Information and Insurance for Crops in Emerging Economies), was launched in 2012 and collects and analyses detailed information on rice-growing in the Philippines, Vietnam, Cambodia, Thailand and India.

The technology will underpin a new national insurance scheme in Vietnam that aims to increase national food security and income safety for the farming population by offering insurance premium subsidies to eligible farmers.

In November 2016, the Indian state of Tamil Nadu’s government introduced RIICE technology into its insurance system. Now, more than one million of its farmers are insured.

Using the technology, Tamil Nadu’s government has been able to provide support well in advance of crop failures. In addition, more than 22,500 rice farmers received compensation for crop losses within three months — instead of up to a year — after a severe drought in 2017.

PREPARING FOR BUSHFIRE SEASON

As Australia stares down another bushfire season, the devastating impact of last summer’s fires remains top of mind.

A frightening example of the impact of changing climatic conditions, the natural disaster was fuelled by record-breaking temperatures and drought across the nation’s southern and eastern states. 

The fires killed 33 people, burnt almost 19 million hectares of land, destroyed more than 3,000 houses and produced record loss amounts of around A$2.8 billion, of which around A$2 billion was insured due to the high proportion of fire insurance cover for buildings.

The Australian National University’s Dr Marta Yebra is involved in developing the first Australian satellite designed to predict where bushfires are most likely to start and those that will be difficult to contain.

She explains that satellite technology is now used in almost all facets of bushfire management across the globe.

‘It provides information about all components of the fire triangle,’ she says. ‘You can know about the fuel conditions — how much fuel there is, how dry it is, how it is arranged. All this information goes into fire danger ratings and fire spread models.

‘During a fire, you can also know where the hot spots are. You can use satellites to inform you of where the fire may spread, and that helps to inform evacuation activities.’