Climate insurance gap of $100 bln requires industry shift
Source: Middle East Insurance Review | Jan 2017
ClimateWise, a global network of 29 insurance industry organisations which is convened by the University of Cambridge Institute for Sustainability Leadership, has warned of the urgent need to address the growing US$100 billion annual climate risk “protection gap” in two new reports.
“The insurance industry’s role as society’s risk manager is under threat,” said Mr Maurice Tulloch, Chairman of Global General Insurance at Aviva and Chair of ClimateWise, which authored the reports. “Our sector will struggle to reduce this protection gap if our response is limited to avoiding, rather than managing, society’s exposure to climate risk. As a risk carrier and risk manager, the insurance industry has significant, and as yet untapped, potential to lead others, in reducing this gap.”
In the Investing for Resilience report, ClimateWise highlighted ways that insurers can start to align their asset management, underwriting and risk management activities to support greater investments in resilience across financial markets. Recommendations include support for green bonds, resilience impact bonds and investments in resilience-enhancing infrastructure. The report also calls for the introduction of a resilience rating system to help asset managers and policymakers integrate resilience as a consideration into their investment portfolios.
The economic impact of these natural catastrophes is growing quickly, with total losses increasing five-fold since the 1980s to around $170 billion today. Over the same period, the average annual protection gap has widened quickly from $23 billion to $100 billion today, according to analysis by ClimateWise member, Swiss Re.