Satellites can expand bounds of insurability

Satellites can do much more than provide cool weather system pictures and mobile phone connections.

They are a great example of how technology can be an ally in building a more sustainable future and also present insurers with an opportunity to grow good business – because ultimately sustainable business is good business.

Specifically, Earth observation (EO) satellites – of which there are nearly 1,000 orbiting the planet – are using ever-more sophisticated remote sensing techniques to provide us with increasingly granular data about the state of the world we live in.

Mapping sustainability

This sophisticated space technology offers unparalleled opportunities to map the planet’s sustainability challenges and enhance the insurance industry’s risk modelling and intelligence.

Remote sensing data from EO satellites can help governments and organisations better understand the Earth’s environmental challenges and how to tackle them.

Our new report, “Remote sensing: high-resolution geomapping to progress sustainability goals and expand insurability”, estimates that 39 of the UN’s 231 Sustainable Development Goal (SDG) indicators can benefit directly or indirectly from EO data.

EO data for vegetation cover, habitation patterns and hydrometeorology together with other data can provide granular insights into progress on sustainability issues. For example, forests and mangroves are great carbon sinks, as well as supporting biodiversity. These nature-based solutions are a key tool in mitigating the effects of climate change.

With EO data it is possible to see where deforestation is occurring and determine where resources need to be allocated.

The report estimates that the proportion of SDGs that can benefit from EO data will increase over time as remote sensing becomes ever-more accurate.

However, the ability to integrate EO data to measure progress on the SDGs varies hugely by country. The report cites lack of processing infrastructure, talent and poor interoperability across data frameworks as the biggest hurdles.

Expanding insurability

Remote sensing can enhance risk modelling and intelligence, making insurance processes more efficient.

EO data could, for example, be used for faster, more efficient and more accurate pricing of crop yield risk in the agricultural sector.

Insurers currently collect yield data via crop-cutting experiments (CCE) in a defined area chosen via random sampling. CCEs are time- and resource-intensive, and the relative lack of accuracy means they are prone to basis risk.

Combining historical CCE data with satellite images and weather data creates “smart sampling” that is more representative of the actual crop situation.

This information could also be used to promote more sustainable agricultural practices – aligning with the zero hunger SDG – and serve as an early warning system of impending famine.

In close cooperation with VanderSat, a remote sensing company, Swiss Re developed an effective soil moisture deficit index insurance, aimed at protecting farmers against the financial losses caused by this peril.

Already available in over 10 countries, it pays out when soil moisture deficit reaches a predefined level. The soil moisture deficit is closely linked to the drop in yield that occurs due to drought.

Historical EO data can also be used to model flooding at a more granular scale than ever before, expanding insurability to many homes that were previously uncovered.

Enhancing ally

Remote sensing and EO data – especially when combined with other data sources and machine learning – offer huge potential to enhance risk modelling and intelligence. It could help insurers better price and monitor their risk portfolio, as well as help influence clients’ decisions about their assets.

This could help make households, businesses and society more resilient.

Our industry is already a great consumer and provider of data. Remote sensing will increasingly become our ally in closing the protection gap and expanding the bounds of insurability.

You can also view this article in the first weekly edition of #ReinsuranceMonth, which was published on 1 September by The Insurer and is available to download for free at theinsurer.com/reinsurance-month/weekly-editions.