Insurers can address the challenge of climate change
Source: Middle East Insurance Review | Aug 2022
A new report has said that the insurance industry has a central role in building wider understanding about climate-related risks and in mitigating against those risks.
The new global report, ‘Rewriting the risk: Addressing the challenge of climate change’, published by the legal firm Kennedys in July 2022 said it canvasses the views of insurance industry experts and citizens from a wide range of markets to explore four issues:
- The impact of climate change on insurers
- How to mobilise insurance markets to mitigate climate risks
- Value chain risk arising from climate risk
- The growing trend of climate litigation risk.
The report said, “Filling the data gaps, improving the data quality, and ensuring much more comprehensive levels of corporate climate disclosures across all enterprises of all sizes is a vital step in ensuring that underwriters can price climate risks effectively.”
The report sets out six strategic recommendations for senior managers to adopt them, to stay ahead of potential exposure, including the likelihood of environmental liability claims made against them and reputational harm:
- Embed climate mitigation within governance changes and senior leadership.
- Advocate enhanced annual climate emissions disclosures, to include data on specific emissions sources and, in time, associated biodiversity risks.
- Develop extended net zero plans which consider climate impacts across the business value chain, incorporating sustainable procurement policies.
- Reduce emissions across the value chain by implementing and disclosing details of decarbonisation measures.
- Avoid making misleading statements or pledges in the rush to adopt sustainable practices– to include a review of all consumer literature.
- Seize the opportunities in green technology, green building and renewable energy.
To assist progress, (re)insurers already enjoy access to vast amounts of climate-related data, including trends in their own annual claims data. This is alongside multiple third-party sources of climate and wider environmental risk data used by (re)insurers to refine and better understand climate risks across their businesses, supply chains and client portfolios. M