How Alex Balcombe and Corporate Knights Highlight the Insurance Industry’s Shift in Tackling Climate Change

Harris Balcombe is proud to announce that Alex Balcombe, a leading voice in insurance consultancy, has been featured in a recent article by Corporate Knights, a globally respected platform for sustainable business insights.

As the impacts of climate change grow, businesses face unprecedented challenges in securing adequate insurance coverage for extreme weather events. This calls for innovative approaches like parametric insurance to address climate-related risks and future-proof insurance strategies.

In this blog, we reflect on the original article contributed by Alex to Corporate Knights and discuss its key points to provide further insights into these topics. The article highlights the importance of proactive risk management and collaboration between insurers, businesses, and policymakers to future-proof insurance strategies. By leveraging data-driven solutions and sustainable practices, Alex argues, the insurance industry can play a pivotal role in mitigating the financial consequences of climate change and ensuring long-term resilience.

As the impacts of climate change grow, businesses face unprecedented challenges in securing adequate insurance coverage for extreme weather events. This calls for innovative approaches like parametric insurance to address climate-related risks and future-proof insurance strategies.

When speaking to Mark Mann (author at Corporate Knights) on the topic of Halting the retreat of insurance, Mann says “Obviously, insurance providers have a critical role to play in creating protections for climate change, but as the impacts of shifting weather patterns cost more and more, insurance companies are retreating from the markets where they are needed most.”

Alex responded with an insightful response: “The market learns,” says Alex Balcombe, a partner at Harris Balcombe, a U.K.-based insurance claims consultancy. He points to the COVID-19 pandemic, which disrupted supply chains and cost the insurance industry enormously. Afterwards, they stopped covering pandemics. “Insurance companies got their fingers burned massively there, so they’ve learned,” Balcombe says. “You can’t buy insurance for that kind of event anymore.”

These losses, largely unavoidable at the time, prompted a critical reflection within the sector. Insurers realised the pressing need to evolve and adopt new ways of working (i.e. insurance for extreme weather policies) to better accommodate massive global crises, including pandemics and the increasing frequency of natural disasters, often referred to as acts of God events.

Mann points out that “likewise with climate change, insurers are fleeing areas that are prone to floods, hurricanes and wildfires or charging huge sums for coverage. “These extreme weather events are only occurring on an increasing basis, so there’s certainly a market for cover to be provided, but the question is at what premium and at what level?” Balcombe asks.”

The escalating impacts of climate change are reshaping the world as we know it. These environmental shifts are not only endangering ecosystems but also presenting unprecedented challenges for industries, particularly the insurance sector. Some traditional insurance models, built on historical data and predictable risk patterns, are starting to struggle to keep pace with the unpredictability and scale of climate-related events and risks. As the frequency and severity of natural disasters surge, insurers are compelled to innovate, creating new models and risk management solutions that address evolving risks and ensure resilience for individuals and businesses alike.

“A big part of the answer, Balcombe explains to Mann, is parametric insurance, a mechanism that converges with the trend toward increasing specificity for weather events in force majeure provisions, and actually serves to simplify coverage. In essence, parametric insurance ties the payout to the event that causes the loss, not the loss itself, and sets a predefined threshold for payment, so there’s no ambiguity or need to negotiate. For example, a factory or warehouse in a flood-prone area might struggle to obtain traditional coverage, but by setting a specific water level to trigger the payment and installing a sensor to verify, they can proceed with adaptations for minor floods and still get coverage for bigger damages.”

By linking insurance payouts to a specific weather event or disaster, this model of insurance offers a straightforward and reliable solution for managing climate-related risks for both the policyholder and the insurer.

Traditional insurance models, built for a more predictable climate, are increasingly insufficient in this new reality. In the Corporate Knights’ article, Alex responds to Mann saying, “I think parametric insurance is going to become a massive feature, because it’s a much more economic way of doing things, and it gives people certainty,” Balcombe says.”

Mann continues that “while climate change is dismantling the traditional protections that businesses need, the new solutions are catching up and creating opportunities for companies that are building the post-fossil-fuel economy.”

Therefore it’s evident that as businesses navigate the growing challenges of a changing climate, innovative insurance solutions are becoming essential. While climate change disrupts traditional safeguards, these forward-thinking models can offer stability and flexibility, enabling companies to adapt and succeed in the rapidly evolving economy.

At Harris Balcombe, we specialise in helping businesses navigate complex insurance challenges, including force majeure clauses, managing claims, and adopting forward-thinking solutions like parametric insurance. As a leader in the industry, we are evaluating how elements of parametric insurance could complement our expertise in delivering accurate and reliable assessments.

This commitment underscores our dedication to staying ahead of industry trends, ensuring our clients benefit from forward-thinking strategies that address the evolving risks and opportunities of the modern business landscape. By integrating innovation with our proven track record, we strive to deliver superior outcomes for every business insurance challenge our clients face.

Learn how Harris Balcombe’s strategies align with these solutions: 5 Game-Changing Trends in Insurance and Loss Assessment to Watch for in 2025.

Climate change is undeniably reshaping the way businesses and insurers approach risk management. As Alex Balcombe underscores, this transformation calls for innovative thinking, collaborative efforts, and proactive strategies to safeguard businesses against the growing threats posed by extreme weather events and other climate-related challenges.

At Harris Balcombe, we are committed to leading this change by offering solutions that combine cutting-edge approaches like parametric insurance with our deep expertise in managing complex business insurance challenges.

For further reading, check out the full Corporate Knights article here. If you’d like to get in touch with Alex please contact him on 07714 674949 or email him at alex.balcombe@harrisbalcombe.com. If you want ot get in touch with Harris Balcombe, please do get in touch or Start your Claim now.