The Geneva Association: Insurance Industry Taking Action in Addressing Climate Change, Although External Hurdles Remain


ZURICH–()–The insurance industry is contributing significantly to building
socio-economic resilience to climate change and supporting the
transition to a low-carbon economy in their role as risk management
experts and investors, although a number of challenges are hindering the
industry’s efforts to scale up its contribution, according to a new
research report from The Geneva Association, the leading international
think tank of the insurance industry.

The report ‘Climate Change and the Insurance Industry: Taking Action
as Risk Managers and Investors’
is based on interviews with 62
C-level executives of globally active insurance and reinsurance
companies, and offers insights into the role of the insurance industry
in addressing climate change adaptation and mitigation.

Anna Maria D’Hulster, Secretary General of The Geneva Association,
commented: “The study has confirmed that climate change is a topic that
has made its way up to the boardrooms of the insurance industry,
although insurers are neither the polluters nor the policy setters.
Study participants reported initiatives in three aspects of the
business: firstly, the liability side, where the industry already offers
specialised risk transfer solutions that address the financial
consequences of climate change; secondly, the investment side, where
insurers increasingly integrate climate change considerations into their
investment strategies; and thirdly, the operational side, where
companies are reducing their carbon footprint.”

However, external hurdles hinder the expansion of the insurance
industry’s contributions to climate change adaptation and mitigation.
For example, the expansion of effective risk transfer solutions is
currently impeded by limited access to risk information and lack of
incentive to take up insurance due to post-disaster government aid.
Additionally, the scaling-up of green investments is inhibited by
factors such as a limited capacity of relevant markets to accommodate
large-scale portfolio allocations, a need for well-defined asset
classifications, and fragmented climate policy and regulatory frameworks.

Furthermore, executives interviewed indicated that climate resilient and
decarbonised critical infrastructure represents an opportunity that
poses specific challenges for the insurance industry. Insurance
companies require risk data to assess such infrastructure projects
throughout their lifecycle—from design and construction to operation and
maintenance. Additionally they require a stable regulatory and political
framework, a robust pipeline of opportunities, and an efficient market.

Dr. Maryam Golnaraghi, Director of The Geneva Association’s Extreme
Events and Climate Risk research programme, commented: “Failure to
address climate change has been identified as one of the highest
potential socioeconomic risks to our society. Building resilience to
climate change requires proactive risk management and adaptation
strategies, and transitioning to a low-carbon economy needs to align
governments and the private sector. The insurance industry plays a
crucial role in building resilience and fostering economic and
entrepreneurial pathways that address climate change.”

The Geneva Association is putting forward three recommendations to
accelerate the contributions of the insurance industry to address
climate change:

Recommendation 1: Third party stakeholders such as governments,
policymakers, standard setting bodies and regulators across sectors work
in a more coordinated fashion to address key barriers that hinder
insurers from scaling up their contribution to climate adaptation and
mitigation.

Recommendation 2: The insurance industry should continue to
institutionalise climate change as a core business issue, expand its
contributions towards building financial resilience to climate risks and
support the transition to a low-carbon economy by collaborating with
governments and other key stakeholders.

Recommendation 3: Governments and the insurance industry should
explore ways to support climate resilient and decarbonised critical
infrastructure through the industry’s risk management, underwriting and
investment functions.

The core of the report is based on interviews with Chief Executive
Officers, Chief Risk Officers, Chief Investment Officers and Chief
Underwriting Officers from 21 globally active insurance and reinsurance
companies, with total assets under management exceeding USD 4.7 trillion
and a total premium volume in excess of USD 550 billion in 2016.

ENDS

Full report: Climate
Change and the Insurance Industry: Taking Action as Risk Managers and
Investors

Research brief: Climate
Change and the Insurance Industry

Interviews with the author at The
Geneva Association YouTube channel

Source