By Praveen Gupta
I enjoyed watching kids play the SimCity series of computer games, which are an eye-opener on honing risk management skills and a case study of how we allow them to be frittered away. In ‘Sim Isle’ – Missions in the Rainforest, you’re the king of the forest, and your brief is to create a rainforest. What are you going to do now? You’d better decide fast because there are miners, poachers, developers, endangered species, unemployed citizens, eco-tourists, terrorists, ecologists, natural disasters and even UFOs, all vying for your attention – and for your resources.
A tropical rainforest, as in the Sim Isle, is home to endangered tribes, known and unknown wild species, mangroves, rich marine life and abundant coral cities, is vulnerable to known seismic activity, and is a carbon sink for sure. Let them do an environmental impact assessment (EIA) for the ambitious development of an island before signing off. Ask them to design and execute an ultra-modern holiday resort supported by cruise facilities, an airport, and power plants (significantly fossil fuel-driven). A world class transshipment port. Oil and gas exploration in close proximity. For assessing the threatened species, take a look at the IUCN red list for Nicobar. Sensitise them with the Proactive Conservation Index, or PCI. This new global index helps scientists spot tomorrow’s endangered species today.
As the kids undertake due diligence, they need to be mindful of the planetary boundaries breached (Let’s Stop Pushing: Planetary Boundaries, Sanctuary Asia, Vol. 45 No. 12, December 2025), rising sea surface temperature, growing precipitation, sea level surge, the small island nations unfortunately facing a dire future, and the five per cent chance of the Atlantic Meridional Overturning Current (AMOC) stalling in the next 25 years. They must also keep in mind possible repeated recurrences of seismic activity and tsunamis during the development phase, as they are sitting in the Sumatra-Andaman EQ zone. The last big quake of 2004 and the resulting tsunami, which swept across the Indian Ocean, killed more than 176,000 people in 11 countries and left about 50,000 missing and hundreds of thousands homeless.
The project timeline is 10 to 15 years. The budget outlay $10 billion with a margin of 25 per cent for cost over-runs. Seeking investors and exploring risk transfer are part of the brief. Mind you, the potential insurers are clueless about underwriting (assessing and taking on a financial risk for a fee) a greenfield project on this virgin territory; it is thus highly vulnerable to the circularity of uninsurability and a probable stranded asset. For more specifics, the book The Great Nicobar Betrayal should be eminently handy.
‘Dying Light’ is a survival horror game set in a post-apocalyptic world full of zombies and inhumane characters. While I would not categorise it as risk management, it claims to take gaming to the next level, and offers you one of the most entertaining and exciting gaming experiences.
Set in the year 2102 after the nuclear bomb has destroyed the world, the main protagonist and other vault dwellers are saved. But now, you must leave the vault and explore the horrific and dangerous wasteland to reclaim it. By the way, these can be played on Linux, Microsoft Windows, PlayStation, Xbox, and Nintendo.
Gaming enthusiast Dr. Anthony Richardson shares an interesting perspective on the growing global obsession with post-apocalyptic games and their potential to address sustainability challenges that lie ahead: “I think the most interesting reason why such games are relevant to our contemporary reality is that they exist as models for imagining possible future scenarios around climate change, fuel and food security, or social and technological collapse so that these possibilities can be explored within popular culture. There is a great deal of denial, whether unconscious or conscious, around such challenges facing our wider society. We don’t want to think about such dystopian or uncomfortable possibilities, therefore there is real value in ‘imagining the unimaginable’ and games, in my opinion, are perhaps the best artform for doing this and driving positive change.”
Intergenerational risk is an externality that ought to be internalised when scoping any long-tail risk (a rare event that has a disproportionately large impact). Climate breakdown in particular deserves that attention with urgency. Given what has begun to unfold and what is expected to intensify – not just the integrity but the push back resulting from tinkering with planetary boundaries.
Article 4 of the UNESCO Declaration on Future Generations reaffirms The Seven Generations Principle, which puts the onus on each person to consider the decision they are seeking to make, in addition to considering what the seven generations before them would have done, and how this decision will impact seven generations into the future. The current trajectory, however, assures a “degraded future, destabilised Earth system and societies”.
Regrettably, how we managed to get into a destabilised Earth system – thereby guaranteeing a degraded future for our next generations – is best illustrated by the master of planetary boundaries, Dr. Johan Rockstrom.
At COP30, Dr. Rockstrom warned: “Global warming will exceed 1.50C in the near term, pushing us into overshoot and increasing risks for people and key Earth systems. Extreme events such as heat-waves and floods will intensify and we are rapidly approaching critical tipping points such as the Amazon rainforest, the Greenland ice-sheet and tropical coral reef systems.” Is this what we wish to bequeath? He believes the next few years will determine how far risks escalate. Yet, science also shows a pathway back: rapid fossil-fuel phase-out, strong nature protection, and large-scale carbon removal. And he is not giving up hope.
Dr. James Hansen is one of the most influential climate scientists, and is renowned for speaking truth to power. His presentation is not to be missed by anyone who wishes to explore ‘Can Young People Shape Their Future: Discussion of Real-World Evidence’.
Extreme heatwaves and floods are intensifying as the planet nears critical tipping points from the Amazon rainforests and Greenland ice sheet to tropical coral reefs. In India, the Nicobar Islands now face direct threat from a major development project. Photo: Gobind Sagar Bhardwaj.
Global disaster losses exceed $732 billion annually, and the indirect costs are higher. Africa and island nations face disproportionate infrastructure and climate risks. Indirect economic impacts average 7.4 times direct infrastructure damages, according to Global Infrastructure Resilience 2025.
Insurers are not mere risk carriers; they are risk managers and investors. It is not just those countries that have not been greenhouse gas emitters and yet suffer. Also, those responsible for it cannot get away any longer. Increasingly it is turning out to be a challenge for both the global south and the north. Insurance mitigation is threatened by protection gaps and uninsurability. Disaster capitalism is an exciting diversification for the opportunistic ones, while it lasts.
Lisa Sachs is the Director of the Columbia Centre on Sustainable Investment. Her musing on the aftermath of recent Hurricane Melissa says it all: “Jamaica has one of the most elaborate disaster-risk financing stacks: a government disaster reserve, contingent credit lines, parametric insurance through Caribbean Catastrophe Risk Insurance Facility (CCRIF), and a US$150m catastrophe bond at the top.
In principle, this financing stack seems like it should cover all shocks, from the smaller to the most extreme. But in practice it doesn’t work so neatly.” She explains:
. Parametric triggers only pay out if specific storm parameters (such as wind speed or track) cross the pre-set thresholds.
. Contingent credit lines theoretically provide fast liquidity, but the government must actively draw them down, and they still add to debt burdens.
. Even if every instrument in the stack were triggered, the total coverage would only amount to a fraction of Melissa’s likely losses – in the billions. The rest falls back on Jamaica’s already constrained budget and debt.
. And when a cat bond doesn’t trigger, as has happened before, investors earn high returns (from the premiums Jamaica has been paying), while Jamaica is left with little or nothing to rebuild.
. This is the resilience gap laid bare: the countries least responsible for climate change are paying the most for protection that remains partial and inadequate.
. The likes of storms battering Jamaica are the consequences of climate change driven by high-emitting countries, past and present.
. Credible, well-designed and fair risk-transfer mechanisms are important, but over-emphasizing risk transfer mechanisms while failing to urgently halt the underlying escalating climate risk is not only a losing battle but extremely unjust.
Needless to mention – Professor Shannon Gibson of USC Dornsife College of Letters, Arts and Sciences exposes how climate finance to help poor countries has become a global shell game – donors have counted fossil fuel projects, airports, and even ice cream shops.
Dying Light is a survival-horror game set in a post-apocalyptic world of zombies and moral collapse. Its relevance today lies in how it models possible futures shaped by the climate crisis, resource scarcity, and social or technological breakdown played out through popular culture. Photo: Public Domain.
Professor Alison Taylor of NYU Stern throws light on the Disaster Industrial Complex assuming a bigger and bigger share of the American economy: “Weather disasters like Helene are becoming both more frequent and more severe because of climate change. Although they blow over fast in physical terms, the economic impacts play out slowly. It takes three to six months for survivors’ insurance checks to land, at best; maybe three years for federal reimbursements to cash-strapped localities to drip out.
The result is that the US is now always paying to recover from disasters, and this is contributing a larger and larger share of GDP growth. The US economy has grown by $20 trillion since 2000, to
$29 trillion last year. About $7.7 trillion of that – or 36 per cent of all the growth in GDP – is spending related to recovering from or preparing for disasters, according to research by Andrew John Stevenson, a senior analyst at Bloomberg Intelligence.
The country spent almost $1 trillion in the 12 months ending in June, money that almost everyone would prefer to spend on goods or services of their choosing. In the 1990s, the annual average was closer to $80 billion in current dollars.
Government spending on disasters, and companies leading the recovery, make up an underappreciated, yet major, slice of the US economy. The money goes to insurers and waste haulers, power grid equipment manufacturers and engineering contractors, hardware stores and self-storage facilities. These are good businesses to be in challenging times. FEMA may or may not be there when the next Helene hits. But as long as there is someone footing the bill, the disaster industrial complex will be.”
Prof. Nicholas Stern, former IMF chief economist, dedicates his latest book The Growth Story of the 21st Century, to his grandchildren. “Here is still time to avoid the worst impacts of climate change, if we take strong action now,” he said in the Stern Review back in 2006. Yet, we continue to dither.
Climate action encompasses more than just a successful transition and the associated investments. The climate has already shifted in dangerous directions, and further changes are inevitable. Understanding how to adapt and investing in adaptation are now major and urgent challenges. Additionally, responding to the loss and damage that will occur, even with sensible adaptation and resilience measures in place, is a key global responsibility; it is global emissions that have caused the problems.
There is a critical need for information with sufficient precision to enable local action. That action involves not only building and designing more robustly, but also the ability to act in a timely way when disasters occur or are imminent. But we should at the same time recognise that the experience of climate change has brought a greater focus on disaster risk management. And there is increasing awareness of the importance of designing resilience into infrastructure and supply chains.
Saul Humphrey, Senior Vice President of the Chartered Institute of Builders (CIOB), echoes Nick Stern: “We must shift from incremental improvement to transformational change. Re-thinking designs, materials, operations – not just “better than yesterday” but to eliminate/reduce emissions at source and throughout a building’s life but also sufficiently resilient to adapt to a 20C plus world.”
Back to the Nicobar Moment. India’s ambitions to grow tenfold and become a $30 trillion economy by 2047 mean 90 per cent of the country is yet to be built.
By pushing planetary boundaries beyond the goldilocks zone, we could be staring at multiple irreversible tipping points. Our coming generations – irrespective of what pin-code they reside at – could be in the jaws of uninsurability. Our actions and inaction have grievous inter-generational bearing.
Iceland’s climate minister Jóhann Páll Jóhannsson raised the bar at COP30: “We believe that confronting climate tipping points and the risks they pose openly is not a sign of ‘pessimism’ or ‘alarmism’ but a sign of realism and responsibility.” Iceland is the first country to declare the potential collapse of the AMOC a national security threat.
Can we start behaving as stewards for the sake of the coming generations, rather than stay clung to “mainstream political and economic thinking, which sees our planet as a servant of humanity”?
Praveen Gupta is a former insurance CEO. He believes insurers – like other financial services – have a critical role to play not only in nurturing our environment today but also ensuring planetary well-being for the long term.
