Insurers need to ‘partner up’ to become climate trailblazers
The insurance industry has an opportunity to be a trailblazer for climate change resilience and mitigation, but it “can’t do it alone”, according to a panel of senior industry executives speaking at the Intelligent Insurer’s Climate Risk & Sustainability Europe 2023 conference, in London today (June 7).
The session, titled ‘Changing Risk and the Impact on Insurance Products: Identify Climate-focused Commercial Opportunities’, identified potential changes that would support the industry in reaching its trailblazer potential.
The session featured Gillian Rutherford (pictured), head reinsurance sustainability at Swiss Re, Philipp Bäcker, head of sustainability, Corporate Development at R+V Versicherung, Marco Lo Giudice, head of emerging risks, portfolio risk management at Lloyd’s of London, and Gregory Overton, director, Climate Analytics and Exposure Management at PwC UK.
Panellists suggested that the re/insurance sector could take a leaf out of the banking sector’s book in terms of taking a more opportunity focused approach to climate risk.
Traditionally the insurance industry is very well versed in looking at the downside, for example the 1 in 100 or 1 in 250 year events. Then insurers look at the upside of that as a consequence, while banking does the opposite, delegates heard.
The banking sector first looks at the upside, or the return they can get from the investment, and then it looks at the downside as a protection element. But for insurance to be able to do that, sector players need a multidisciplinary approach where they don't just look at the downside and it isn’t all about the risk, it’s also about the opportunity, delegates heard.
The panel said that as underwriters look at the opportunities for insurance they need to be brought into the picture to unlock those opportunities. But they can’t do it alone because there are risks associated with it that need to be managed.
Swiss Re’s Rutherford emphasised that the industry “cannot do it alone” when it comes to tackling climate change. She said: “There’s a role for re/insurers to make very clear climate commitments and strive towards a world that is not warming towards 1.5 °C by 2015.
“In terms of not doing it alone, we are also very dependent on the real economy going in the same direction, the same commitments from businesses, governments and individuals, so it’s very very important.
“So it’s partnering up to achieve that 1.5 °C limitation.”
Bäcker from R+V Versicherung said that historically insurance companies exist because people want safety during their lives.
“I see insurance as an engine of progress because we insure something when people are venturing into new areas,” he said. “The same is true for the banks, if you need financing for something, you also need insurance. We can be part of that journey our customers take. You just need to listen to them about what the challenges are and how we can help them.”
PWC’s Overton commented that it was down to the insurance industry to take a lead role in tackling climate change .
“There’s an important role for the insurance industry to play in supporting customers, in pushing and nudging them along those journeys. A lot of them know the sorts of things they need to do but they don’t know where to start or how to manage the change in risks that they’re going to be facing, so physical risk and transitional risks.”
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