by Luca Valpreda

In Italy too, climate change is causing natural catastrophes with dire social and economic consequences. The UnipolSai group has developed an innovative prevention model to help citizens and businesses assess and prevent risk. Marisa Parmigiani, sustainability director at UGF 
(Unipol Gruppo Finanziario) told us more.


Let’s start off by saying that climate change isn’t just a huge scientific or energy problem. It sometimes seems to become a sort of sports stadium, where the supporters of the two different sides, the “catastrophists” and the “deniers”, fight it out. What do you think?
I don’t see it that way. The climate denier front has shrunk greatly in the last two years. The scientific community is compact, opinion leaders – the serious ones, not the ones along for the ride, especially in the USA – all agree that global warming is a real and potentially destructive phenomenon. On the other hand, general public awareness is still very low.

How did climate change get on to the Unipol agenda?
Every three years we review our sustainability plan, which comprises ten policies, each of which in turn envisages specific measures. One of the ten macro-objectives for the three years 2013-2015 is climate change. You have to remember that for the great majority of business organisations, commitment to this issue involves planning and rolling out measures to cut the emissions for which they are directly responsible. For us, as an insurance group, the situation clearly is different. Measures are already being taken in our offices, but given our line of business, we are clearly not polluters. We want to have a different sort of impact.

In what way?
Let’s begin with some background. On one side, due to climate change, changes are taking place in our territory’s vocation. In agriculture, to give you an example close at hand: Emilia has always grown peaches and apricots, but the crops have suffered greatly in recent years, due to hailstorms of unprecedented violence.
The second question is that risk is changing. Today, we are witnessing a new phenomenon, “water bombs”. Flooding used to be the result of days or weeks of rain. Today, 300 mm or more of rain can fall in two hours. And there are other new events such as tornados, which up to twenty years ago we used to watch as a sort of exotic happening, in US disaster films. Now they happen here, look at the tornado in the Veneto region on Wednesday (on 8 July, ed.).
Climate change brings new problems. They may not be new in absolute terms, but the examples I’ve just mentioned are new to Italy. We have to equip ourselves. We have to analyse the problem, take sensible action, look at best practice in other countries and see what models can be replicated here.

What was the first thing you did?
We looked at how the issue could be integrated with our products and processes. And we realised that risk profiles have changed. Risk used to be polarised: either there was a major catastrophe, which fortunately was a rare occurrence, or there were small events, such as minor floods. But now we’re seeing what you might call “small catastrophes”, which occur increasingly frequently. So risk profiles have changed and we therefore need new safeguards. New in the sense that, for example, they involve risk sharing between public and private.

And interesting examples can be seen abroad…
Yes. In France, the State acts as reinsurer, insuring insurers, and plays this role if the catastrophe exceeds a specific intensity threshold. Conversely, in the UK, which has a strong tradition of liberism, the State intervenes in cases of less severe damage, whereas larger catastrophes are managed by a pool of private insurers.

Is the conduct of the insured a factor in the risk analysis?
It certainly is! This type of insurance always has to consider the conduct of the insured, whether and how they acted to reduce risk.

But is it really possible to insure everything?
No. You shouldn’t insure parties who mistreat the territory. Unipol does not insure parties who have received a pardon for infringement of building regulations. These sort of offences should be eliminated, not insured. It’s not just a question of degree of risk, that is, of the cost of the premium, which in theory would be exorbitant, it’s also an ethical question.

Let’s look at this more closely. Suppose I have committed no offences, but have a ground-floor shop in a high-risk area such as Viale Brigate Partigiane in Genoa. And now I want to take out a flood insurance, because I’m terrified something will happen again in the autumn. What can I do?
Viale Brigate Partigiane, which was called Viale Brigate Bisagno before the war, was built by Mussolini because in Genoa, with all its alleys and lanes, there was nowhere to hold a parade. The road was constructed by filling in the Bisagno river. It was a terrible mistake, because when the water level rises, it has to go somewhere. If you had a shop there, the chances of being flooded are so high that a policy premium would cost a fortune. Your best course is to take all the steps you can to minimise damages and look for a form of preventive investment to provide you with funds for any repairs, which would be more effective than insurance cover.

I see. But which sort of client is able to carry out this sort of risk analysis?
Large organisations are well equipped. The role of the risk manager has gradually evolved, both as a professional figure, and in terms of seniority in organisations. In other words, large businesses know what to do. The problem is with SMEs and private individuals. They don’t have a risk manager because they can’t afford one. In these situations, in Unipol’s view, the best approach is to find an “aggregating party”, which brings together many players from the same community, the same district, the same area of business. This sort of association, which must also include a public interlocutor, can achieve the necessary scale for sustainable risk sharing and for correct and affordable preventive analysis.

Do associations of this type already exist?
We’re working on a pilot scheme. We’ve chosen Turin for the pilot, because the city has an average risk level, similar to many other parts of in Italy. We’ve signed an initial agreement with the city authorities and with them will identify the area for the pilot, giving preference to an area with a large number of SMEs. Then we’ll conduct a risk analysis and, depending on the results, organise the measures to be taken, at public level, and for each company.

Are the measures in question complicated?
You’re often looking at very simple action. Do you have a warehouse? If you raise the goods off the ground, you significantly reduce the risk of flood damage. Does the warehouse door face the river? Move it to the other side and you’ll be safer.
Translated into more general terms, we have to create widespread awareness about risk, about the social value of insurance, about prevention…

Prevention: is people’s behaviour important?
Of course! If I use a drain as a waste bin, then I can’t complain if it overflows the first time it rains. And behaviour isn’t important just for prevention, it’s just as important during an event. If there’s a flood, should you jump in the car and rush to take your kids out of school? No, leave them there; the teachers will take them all up to the top floors and everything will be fine. Taking them back home in the car is a thousand times riskier. If there’s a flood, should you race to move your car to a higher carpark? You’d be mad, leave the car to its fate and think that your life is far more important. Italy lacks awareness about responding to an emergency. It’s different abroad. When I tell my British colleagues that we still have to teach people the basics, they look very sorry for me.

What does your pilot project in Turin envisage?
In parallel with territorial action, we are going to study new financial tools to provide support and ensure protection. It’s not a completely new approach, it already exists in other countries. These tools are what are known as green bonds, or climate bonds, complex financial instruments that may involve government or transnational financial bodies like the EIB, whose dimensions are such that they attract international institutional investors.

Why are you conducting this trial?
Because we want to create a model that can be replicated elsewhere. Because we want to make a positive contribution to the Country System.

Are you in favour of mandatory policies against these types of risk?
We don’t think this is the solution for Italy. Indeed, we agree with the Legambiente when it says that mandatory insurance against this type of risk could induce the legislator not to take action to make the territory safe. We have to make people aware of their responsibilities, as we said, but we have to continue pushing for greater responsibility among legislators and administrators.
Here again, it’s interesting to look outside Italy. Switzerland has a semi-mandatory approach, in that you have to have insurance against this type of risk when you take out any sort of property policy. But in Switzerland, a portion of the premium goes to the cantons to fund action to make the territory safer. Spending has to take place within specific deadlines and every activity is transparent, because it is published and monitored. In Italy, we have something similar with the protection fund for road accident victims. This could be a direction to take.

When we started talking, you said climate change also has to be part of your processes. Are you also talking about additional services?
That’s part of it. Let me give you an example. A large distribution chain has built a warehouse on the landfill of a water course. The company has stepped in, made the stretch of river by its warehouse safe and maintains it well, but the owners of the upstream properties have not taken similar action, with the result that the warehouse is subject to frequent flooding. In this case, we’ve activated an immediate intervention service to clean up and remove the water as quickly as possible. The speed of response is proportionate to the extent of the damage. The quicker you act, the more you reduce the damage.

So it’s the job of an insurance company like Unipol to put together a strong team of sweepers ready to move in at any time?