As an insurance company, we study emerging risks, including climate risks, to understand how such risks directly affect our insurance operations. We also conduct our business in a manner that limits our environmental footprint and encourages our employees to adopt habits that promote environmental stewardship.
Climate change is a complex and evolving issue. Climate change could have a significant impact on longer-term natural weather trends, including increases in severe weather and catastrophic events. The incidence and severity of catastrophes are inherently unpredictable. While catastrophes are generally restricted to fairly specific geographic areas, for insurance purposes the extent of loss is a function of both the total amount of insured value in the area affected by the event and the severity of the event.
Kinsale uses sophisticated computer models to simulate and track exposure to extreme weather events across our underwritten portfolio of property risks. We measure exposure to these losses in terms of probable maximum loss, which is an estimate of the amount of loss we would expect to meet or exceed once in a given number of years (referred to as the return period). When managing our catastrophe exposure, we focus on the 100-year and the 250-year return periods. We manage our main catastrophe risk – hurricanes – through careful and disciplined underwriting, extensive reinsurance protection purchased from financially strong counterparties, and monthly catastrophe modeling of our portfolio.
As we evaluate risks associated with climate change, we also recognize opportunities that may be available to us. Our insurance policies typically have one-year terms; consequently, we are able to adjust our pricing and our coverage terms each year in response to changes in frequency and severity of weather-related claims. In addition, because Kinsale operates in the non-standard or excess and surplus lines (“E&S”) market, it provides us with unique market advantages. Significant changes in claim frequency and severity create volatility in the financial results of insurance companies. Significant volatility generally causes standard line insurers to avoid certain business risks, thereby forcing those risks into the E&S market. The E&S market, with its regulatory freedom of rate and form, is designed to handle the additional volatility by charging higher rates and/or offering more restrictive terms and conditions.
Our Environmental Impact
Kinsale is a highly efficient digital company: from our state-of-the-art technology to our single office location in our energy-efficient building, we operate with minimal impact on the environment.
- We maintain a limited headcount as a result of our highly automated business approach.
- We discourage private air travel in favor of more environmentally-friendly commercial flights.
- We promote a recycling culture amongst our employees.
- We recognize that operating in an efficient manner and promoting environmental stewardship is important and will continue to do so in the future.