Climate change, concentration of assets and the interdependence of industries will continue to increase the severity of economic and insured losses, the Actuaries Institute has heard.

Hannover Re GM Australia and Head of Property and Casualty Australasia Michael Eberhardt spoke at the institute’s Managing Extreme Events forum in Sydney last week.

He stressed the importance of insurance in this hothouse risk environment.

Recent natural disasters have provided (re)insurers with critical “learnings” that will prove vital as catastrophe risk levels heighten, he says.

Mr Eberhardt illustrated his point with three examples: Hurricane Katrina in the US in 2005, the 2011 Thailand floods and the 2010/11 New Zealand earthquakes.

Katrina resulted in the implementation of risk mitigation measures such as building codes and dam construction. Catastrophe models were adjusted to factor in additional losses after events, and realistic disaster scenarios were factored into the risk management process.

The floods in Thailand – for which there was no precedent and therefore only rudimentary modelling – underscored the need to “expect the unexpected and think outside the box”.

In the wake of the New Zealand quakes, open-replacement policies shifted to sum-insured policies for most parts of the market.

The disaster underlined the economic importance of insurance. “The high insurance penetration rate allowed the New Zealand economy to continue to grow [after] the devastating earthquakes occurred and to moderate the impact on debt and GDP,” Mr Eberhardt said.

With the growing prevalence of weather-related disasters, insurance companies will increasingly take a front-and-centre role.

And the experience in each of the highlighted disasters points to public relations maelstroms ahead.

“The public picture of the insurance industry following these events has been negative, despite billions in payouts. Insurers are seldom the darling [in these situations],” Mr Eberhardt said.