Sustainable Insurance

Climate Change

For several decades we have been aware of the impact we are having on our planet but until fairly recently, very little has been done to combat climate change. The International Panel on Climate Change has predicted that as little as a 2-degrees Celsius global temperature increase, above pre-industrial levels, would have devastating consequences for the entire planet and its inhabitants. What is really worrying is that we are already estimated to have caused between a 0.8- and 1.2-degrees Celsius increase.

Climate change is already said to be responsible for some of the more unusual weather we have experienced around the world in the last few years and as the global temperature continues to rise, we can expect to see more frequent unpredictable and intense conditions. Without a significant turnaround in this trend we will almost certainly see more regular wide scale damage such as, farming losses from drought or wildfires and property damage from flooding and storms or worse.

Role of the Insurance Industry

With the necessity of calculating and predicting risk, the insurance industry is inherently always looking forward. Historically, this has often resulted in the industry having an essential role in the improvement of safety standards and the reduction of accidents e.g. by identifying fire risks or increasing road safety practices. Through the identification of future risk, the insurance industry is in a fairly unique position to challenge the system before it becomes unmanageable and to lead the way to a greener future.

However, although the concept of climate risk has been recognised for a number of years within the industry, any effort to address the issue has usually been focused on adaptation rather than offering preventative action. Whilst concentrating on moderating harm and minimally adapting existing offerings to handle increasing and changing demands may seem appealing, insurance naturally has its limits. As the climate continues to change more drastically, many areas prone to natural disasters and therefore insurance claims, will eventually become altogether uninsurable. Ultimately, instead of just adapting to the developing risks, in order to ensure the future of the industry, firms have a responsibility to take action to help reduce emissions and limit the effects of climate change.

It’s not all doom and gloom

Climate change presents not only difficulties but, for those willing to challenge existing procedures, it offers opportunities to develop and grow, whilst furthering the climate agenda.

In order to implement change, firms should ensure the climate fight is at the heart of corporate governance policies. Some larger firms have committed to diverting investments into carbon neutral ventures or funding further research into environmental risks to better the industry understanding. A few have even introduced policy that pledges not to continue to invest in areas that deal in non-renewable resources.

However, on a smaller scale insurance firms can help to accelerate the fight against climate change by offering new products, services and policies that are tailored to forwarding green innovation. These new offerings can pave the way for technology vital in combatting climate change, such as developments in power production, energy storage, transport and other green industry, by aiding a smoother market entry.

Ultimately, at the very least, all firms should take action by committing to reducing their operational carbon emissions.

About the author

Chloe joined us in 2020, having graduated with a 2:1 in Graphic Communication at the University of South Wales. Chloe assists in the design and content creation of new e-learning modules as well as the re-branding of existing courses.

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