Nov 08, 2008 News
International consultancy examines potential insurance losses
A team of consultants from McKinsey and Company, a global management consulting firm, is currently conducting a study in Guyana in an effort to quantify the potential losses that Georgetown and surrounding areas would suffer should there be any catastrophe relating to climate change.
During last week, one of the consultants held a meeting with representatives from the insurance industry to exchange information.
Commissioner of Insurance Maria Van Beek, during an interview, said that the researchers are specifically focusing on flooding and are looking at two main risk factors, which are breach of sea defences and increased rainfall.
She added that the consultants are here trying to put a number on what the potential losses could be for this area and, obviously, the cost to the economy. According to Van Beek, they are in the preliminary stage of the project, and part of the groundwork was to meet with insurance companies and her office to get supporting data for the data they have already collected from various agencies, such as the Bureau of Statistics.
“The insurance industry in particular would have quite a bit of data on residential and commercial properties that they have insured, given that the nature of their business is also to quantify those kinds of risk.”
In other words, she added, for the insurance company to be able to charge a premium and particularly to cover flood, it would want to try to quantify the amount of money it could potentially lose.
In a way, the insurance sector is already doing some of the work that the team has to do, Van Beek noted.
She pointed out that the team has to look at not just insured houses and property, but also at everything else. It is, nonetheless, useful to have the information from the insurance sector, since it would add weight and confidence to the figures that they are producing.
The consultant was also able to share ideas and thoughts with the insurance sector, and since the sector would have an insight into the cost of these things, the members were able to give him some information right away.
Van Beek indicated that her officer is playing the role of helping to coordinate that exchange of information.
She noted that it is a very important study and something that will benefit Guyana in the long term.
“It’s something that, if you look, it’s not just short term; it’s not just what is going to happen next year or during the next flood, but it’s really to do with a very long term review on what climate change will mean to this country, particularly to the coast and Georgetown.”
Van Beek also said that since climate change has been a major area of focus, especially over the last few years, it is very useful to have an independent company, and one of such international respect, come and try to quantify this.
This study, she stated, is being funded by various international partners, and not just the World Bank, but also insurance companies.
“One of the biggest international companies, Swiss Re, is behind this project as well…And it is not just focusing on Guyana. What it is trying to do is really to produce a report to highlight the effects on all kinds of countries…Not just the developing countries but the developed countries also.”
According to her, the idea is to get as many diverse countries as possible, and Guyana is one of them.
“What they are really trying to do is to map out what is climate change costing. They know the sea level is going to rise and that will obviously affect Guyana differently than maybe other countries.”
Van Beek noted that, for the insurance industry, it is quite an interesting study, because the insurance companies would love to know the conclusion on the effect of climate change on Guyana.
The company conducting the study, McKinsey and Company, is a global management consulting firm that focuses on solving issues of concern to senior management.
McKinsey serves as an advisor to the world’s leading businesses, governments, and institutions.
It is widely recognized as a leader and one of the most prestigious firms in the management consulting industry.
McKinsey has over 7,500 consultants in 90 offices across 51 countries.
Clients include three of the world’s five largest companies, two-thirds of the Fortune 1000, governments and other non-profit institutions.
McKinsey’s clients represent more than 70 percent of Fortune magazine’s most-admired list, more than 90 of the 100 leading global corporations, and governments in more than 35 countries. Forbes estimated the firm’s 2007 revenues at $4.37 billion.
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