Global insurance industry collaboration ClimateWise has published a report where it has mapped out a path to help guide reinsurers and insurers to integrate environmental protection as climate change worsens the frequency and severity of natural disasters.
ClimateWise’s roadmap suggests the re/insurance industry has a vital role in protecting the natural world to help protect the natural capital and ecosystem services.
According to the group, to enable the industry to fulfil this role effectively there is a need to drive insurance market awareness and mainstream nature-positive considerations into insurance companies’ strategies, alongside their net zero ambitions, as well as towards policymakers and key legislation.
“The value of nature needs to be integrated into underwriting to avoid irreparable damage to the natural world. The cost of not doing so is vast and understated […] The insurance industry is built on the ability to quantify risks. Moving towards integrating nature-related risks and impacts into insurance brokerage and underwriting can be seen as a ‘natural’ evolution for the industry,” the report stated.
“The insurance industry can expand its role in society to support risk management through proactive nature-positive measures to help contribute to the protection and restoration of nature – both in advance of and in response to a disaster or loss.”
Harriet James, SVP, Head of Sustainability Strategy, RenaissanceRe and Managing Committee Chair, ClimateWis, commented: “Utilising our risk and underwriting expertise, the insurance industry is in a unique position to understand, quantify and manage nature-related financial risks and leverage existing frameworks to develop innovative product solutions that reduce biodiversity loss and ecosystem collapse. This Roadmap explores these important topics and provides key actions to support the industry in progressing a nature-positive journey.”
ClimateWise’s report revealed that the identification and integration of nature-related risks and impacts in underwriting and insurance brokerage has highlighted that nature-related risks are not being assessed at present by the re/insurance industry due to a lack of awareness and understanding, lack of data and skills, an insufficiently enabling policy environment and lack of buy-in from insurance sector c-suite decisionmakers.
It noted that finding solutions to these challenges can modernise and empower the way insurance manages climate and nature-related risks, while increasing financial flows to sustainable assets and projects, and reducing flows to those with a negative impact on the planet.
Dr Nina Seega, Director, Centre for Sustainable Finance, Cambridge Institute for Sustainability Leadership which convenes ClimateWise, highlighted the vital role that the re/insurance industry plays in protecting the natural world.
According to the World Economic Forum, biodiversity loss and ecosystem collapse is cited among the top five long-term risks for societies and economies, behind failures to mitigate and adapt to climate change and natural disasters and extreme weather events.
Seega said: “[The re/insurance industry] is uniquely placed to improve our understanding of nature-related financial risks, invest in nature-based solutions and protect natural assets. This roadmap summarises challenges the re/insurance industry is facing today, practices that are happening now and actions that need to be taken to enable the industry to fulfil its role.”
ClimateWise calls on the insurance sector and wider economic actors to:
- Develop more use cases and adapt present models in order to improve understanding and measurement of nature-related risks
- Create new approaches to modelling and understand asset ownership in order to innovate in asset protection
- Develop investment and insurance solutions, and prioritise major dependencies on nature to facilitate capital flows
- Engage constructively with policymakers to create an enabling regulatory framework
- Support customer and client education and engagement by incentivising nature-positive behaviours
