This week our Director of Advocacy and Executive Sponsor for Climate Change, Ben Wilson, spoke at the at the Chartered Insurance Institute’s Labour Party Conference event, which explored the role of insurers in tackling the Climate Crisis. Our blog about how insurers are at the forefront of tackling the Climate crisis.
Insurers are at the vanguard of the response to climate change. As institutional investors, our role in protecting the environment is vital, which we can do through our investments and by innovating to develop new products. As an industry, we also protect customers who are most effected by climate change
The challenges of Coronavirus are significant but they cannot distract from responding to the forthcoming climate crisis. You can already see the impacts of climate change across the globe, and in the UK 1 in 6 homes are now exposed to climate-related flood risk. Last winter the industry paid out over £500million in response to significant flooding and the chances of further significant flooding, or other extreme weather related events, be it subsidence claims due to heatwaves or frozen pipes due to Antarctic winters, are only going to increase. Investment in flood defence infrastructure will help in the short term, but concerted long term action will be required.
Like every industry, we accept that there is much more to be done, and with COP26 next year this is a huge opportunity for the insurance industry and wider society to prioritise green investment.
The ABI plays an active role as a founding member of ClimateWise, and our members are taking action to respond to stringent climate reporting measures from the Bank of England and the regulators. The ABI are formal supporters of the globally recognised Financial Stability Board’s Task Force on Climate-related Financial Disclosures’ recommendations for disclosing climate related risks, and many of our members have adopted this framework. We are already some of the largest investors in the green finance markets. ESG considerations are an increasingly important part of investment decisions for both individuals and for firms, and are an opportunity to further engagement people in their long term saving. Our members provide such responsible investing products, and just this week we have seen one of our members launch market-leading tech services which provide tailor made advice for their customers which help them to increase their climate resilience. Our members are also undertaking innovative policies in their approaches to tackling climate change, such as through the creation of bespoke policies for electric vehicles or through increasing their internal carbon levies with the goal of achieving net zero operational emissions.
But like every industry, we accept that there is much more to be done, and with COP26 next year this is a huge opportunity for the insurance industry and wider society to prioritise green investment.
Insurers, with over £1.7trillion in invested assets, hold a unique position to boost green innovations. Shortage of high-quality and consistent ESG data in the financial system or regulatory constraints, make it difficult for insurers to identify and invest in green opportunities. The Solvency II regime, which is expected to be reviewed soon, could offer an excellent opportunity to change this by doing more to consider sustainability factors for assets, particularly given the good match between long-term investments and liabilities. A more favourable regulatory regime would help the industry to contribute to the Green Industrial Revolution and play its part in delivering a net zero economy, a more sustainable recovery and helping to create new jobs across the country.
We face a critical juncture in the next year in turning the dial on climate change. From our sector’s perspective, there’s a number of key opportunities to bring about real industry-wide change, particularly by getting Solvency II reform right.