Insurance Industry Making ‘Significant Contributions’ in Climate Change Battle, Report Shows

January 25, 2018 by

The insurance industry is making significant contributions 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, according to a new research report

The report out this week from the Geneva Association, an international insurance industry think tank, also notes that several challenges are hindering the industry’s efforts to scale up its contributions.

The report, “Climate Change and the Insurance Industry: Taking Action as Risk Managers and Investors,” is based on interviews with 62 C-level executives at insurance and reinsurance companies.

According to Anna Maria D’Hulster, secretary general of The Geneva Association, the study confirms “that climate change is a topic that has made its way up to the boardrooms of the insurance industry.”

She noted that participants reported on initiatives being undertaken in three aspects of the industry: the liability side, where the industry offers risk transfer solutions that address the financial consequences of climate change; the investment side, where insurers increasingly integrate climate change considerations into their strategies; and the operational side, where companies are reducing their carbon footprint.

Several “external hurdles” hinder an expansion of the industry’s contributions to climate change adaptation and mitigation, according to the study.

An example of this given in the study is the expansion of effective risk transfer solutions is being impeded by limited access to risk information and lack of incentive to take up insurance due to post-disaster government aid.

And a “scaling-up” of green investments is inhibited by factors like 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, the report states.

Read the full report on our sister site Carrier Management. The report can also be accessed on our Claims Journal site.

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

  • Third-party stakeholders such as governments, policymakers, standard-setting bodies and regulators across sectors should work in a more coordinated fashion to address barriers that hinder insurers from scaling up their contribution to climate adaptation and mitigation.
  • The insurance industry should continue to institutionalize 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 stakeholders.
  • Governments and the industry should explore ways to support climate resilient and decarbonized critical infrastructure through the industry’s risk management, underwriting and investment functions.

Concerned Scientists

The Union of Concerned Scientists is suing the U.S. Environmental Protection Agency for banning certain scientists from serving on its advisory committees.

The lawsuit was filed this week in federal court in Boston, and it may be an indication of escalating tensions between environments and the Trump administration of over the president’s efforts to roll back climate change regulations.

The group’s main beef is over EPA Administrator Scott Pruitt’s announcement in October, 2017 that he plans to exclude anyone from serving on any of the EPA’s scientific advisory boards if they had received EPA grants to fund any of their research.

“The directive is arbitrary, without any factual or legal grounding, and violates the Federal Advisory Committee Act, which requires advisory committees to be fairly balanced and protected from inappropriate influence by the appointing authority, according to the lawsuit,” the group stated in a release announcing the suit. “As the suit explains, the open exchange of accurate scientific information is a touchstone of a functioning democracy.”

The group called the move by Pruitt, who has openly doubted claims that climate change is being primarily driven by the burning of fossil fuels, as an “abuse of power and an affront to the scientific integrity of the EPA,” and it asserts taht the directive singles out scientists from the nonprofit and academic sector and forces them to choose between public service and their scientific work.

“It’s another example of this administration’s hostility to independent scientific input and basing policy on impartial and balanced scientific evidence,” the group stated. “The directive inherently prevents the agency from receiving independent scientific advice, and erects unnecessary barriers to scientists who want to use their expertise to serve the public.”

France Vs. Coal

France plans shut down all coal-fired power stations by 2021.

President Emmanuel Macron outlined his plans to axe coal on Wednesday for participants at the World Economic Forum in Davos, saying he wants to “make France a model in the fight against climate change.”

The meeting, which runs through tomorrow in Switzerland, tackled a host of worldly topics like global markets, energy, cyber concerns, health, nuclear threats and of course politics.

Climate change and sustainability has also been highly featured at the meeting.

“That is a huge advantage in terms of attractiveness and competitiveness,” Macron said in his speech. “Talent will come where it is good to live. We can create a lot of jobs with such a strategy.”

Macron also addressed carbon trading and called for the European Union to “go a little bit further and create a floor price for CO2.”

His speech wasn’t entirely about a changing climate.

Macron talked about the nation’s plans to help its citizens adapt to a changing economy.

He said the nation plans to invest EU $15 billion over the next five years for education and retraining.

“At the same time, we will make innovation the centerpiece of the economy with a massive effort in terms of research and development,” he said.

He added that the country plans to create a new EU $10 billion fund to finance development and innovation programs, “and especially disruptive innovations.”

CEO Survey

Nearly half of CEOs around the world believe scarcity of resources and climate change will transform their business.

That’s according to a newly released PricewaterhouseCoopers 17th Annual Global CEO Survey, which asks the heads of compaies in 68 countries for their perspectives on climate change.

The PwC survey also shows that 75 percent of CEOs agree that satisfying societal needs – beyond the needs of investors, customers and employees – and protecting the interests of future generations is important.

This is among the indicators that give business leaders “a green light to embed sustainability into everyday strategy,” according to the authors of the survey.

“Sustainability is becoming core to business success,” the survey states. “Being able to sustain business, with one eye on ‘new’ external risks and the other on future consequences of its decisions, underlies it. It’s about managing, reducing and removing risks responsibly and investing to build in resilience.”

Resource scarcity and climate change, as well as urbanization and demographic changes are found regularly among the top three megatrends that CEOs think will transform business, the survey shows.

Within that 46 percent of CEOs who put resource scarcity and climate change in their top three megatrends that will transform their business, only 36 percent of insurance CEOs share this view.

Not sure if this runs counter to the aforementioned Geneva Association report, but even fewer asset management CEOs (33 percent), and banking CEOs (32 percent) share that view. More than three-quarters (76 percent) of energy, power and utility CEOs put the trend in their top three, while 62 percent of mining CEOs do.

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