Report finds gap between climate rhetoric and action
Just 8% of insurers globally qualify as climate change frontrunners, meaning they are taking action that will improve the resilience of their businesses from the worsening effects of global warming, a new report from non-profit financial services body Efma and consultancy Capgemini says.
This is despite the industry ranking climate change as a key risk that will potentially give rise to profitability and insurability issues, the report says.
The report, Walking the Talk: how insurers can lead climate change resiliency, says weather events are already negatively impacting the insurance industry, yet many have not matched their rhetoric with action to prepare for the threat.
Accelerating climate change has already led to worsening catastrophes such as more catastrophic wildfires and storms, and the industry is paying a steep price in the form of increased insured losses.
The report says economic losses driven by climate change have increased by 250% in the last three decades and that no region is safe from climate change.
“Insurers acknowledge climate change impact, but are they walking the talk?” the report says.
“To truly lead the climate resiliency journey, all insurers must revisit their propositions and balance risk prevention with risk management.”
About 44% of insurance executives rank climate change as a top risk, but only 43% of insurers have announced a net-zero emissions target and some don’t have a clear mandate or tangible goals.
The report says fundamental changes are required, urging future-focused insurers to embed climate strategies into their operating and business models.
To make a successful transition, insurers need to revisit data strategy, focus on risk prevention, and move beyond exclusions in underwriting and investments.
The report says climate change presents a unique opportunity for the industry, citing studies that project property and casualty premiums globally will rise by $US2.5 trillion ($3.6 trillion) over the next 20 years to $US4.3 trillion ($6.1 trillion) by 2040.
Climate change will drive 30-40% of the projected increase in premiums, and insurers hoping to capture a slice of the growing revenue pie need to review their climate adaptation business strategies.
The report is based on data from the 2022 Global Insurance Voice of the Customer Survey and the 2022 Global Insurance Executive Interviews covering 29 economies including Australia, the US, the UK and other major insurance markets.
Click here to access the report.
