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Insurance leaders join forces to call for global agreement in Paris

Leading industry CEOs and executives are calling for world leaders to reach a strong global agreement to tackle climate change ahead of the UN Paris Climate Change Conference COP21 next week. The goal to restrict the rise in global temperatures to 2°C, and to ensure an agreement to reduce emissions can be delivered in practice, is supported by leading insurance industry figures in a video published by the ABI today.

The video is available to view by clicking the picture below, and case studies which outline the significance of climate change to the sector here.

Climate change poses significant risks for the insurance and long term savings sector, including:

1. Increase in risk of weather and catastrophic events

The global insurance industry’s exposure to growing weather related losses has increased four times in the last 30 years, to $200bn (£133bn) a year (from The World Bank).  The higher number and more severe major weather events has increased the risks and costs of insurance. For example in the UK, a rainfall event which would have previously occurred an average of once a century, is now likely to happen once every eighty years. Climate change increases uncertainty and makes it more difficult and costly for insurers to help their customers manage risk.

2. Losses in assets

A rise in temperature of 6°C could by 2100 result in losses for global assets of $43trn (£29trn), 30% of the world’s entire stock of managed assets (from The Economist Intelligence Unit).  Insurers are major investors in the economy, with the UK sector managing £1.9trn in assets, mainly to pay for people’s retirement. But a rise in global temperatures could cause losses in global assets; directly through increase in natural disasters, loss of land, damage to cities; and indirectly, through weaker economic growth and lower asset returns.

Louise Hanson, ABI Director of Advocacy, said:Louise Hanson

"Climate change is a global issue of a scale and severity that society has never had to face before, which is why it’s essential we get a long lasting and effective agreement at COP21. The insurance and long term savings sector is using its expertise and assets to be at the forefront of the change towards a low carbon economy. Paris provides the opportunity for an international agreement to ensure the future policy environment is supportive of these efforts."

 

Examples of how the insurance and long term savings industry is tackling climate change:

1. Measuring Risk

Firms support national and regional forecasting of future weather and catastrophe patterns, and use this information to inform their business decisions, including on pricing and assessing investments.

2. Informing Policymaking

Providers use forecasting information to engage with policymakers, and lobby for robust action on climate change from governments. For example, Insurance Europe’s ‘Target Two Degrees’ campaign is gathering industry support for an ambitious agreement at COP21 to limit global warming.

3. Responsible Investment

Providers are working to ensure the assets they manage are used to create a future worth retiring into. They provide their investment teams with responsible investment policies, which utilise new research and analysis across portfolios. This includes work on stranded assets, the economic impacts of climate change, environment risk effects on bond prices, and energy performance of property investments. Providers are also innovating their investment portfolios, and have a growing interest in green bonds.

4. Managing Business Environmental Impact

Providers screen potential suppliers against environment criteria which includes climate change, and prioritise suppliers with established environment policies and management systems. In their own operations, it is common to have increasing renewable energy use, carbon offsetting, energy and water efficiency measures and recycling initiatives.

5. Encouraging Climate Awareness

Firms have taken action to ensure customers are informed about climate risk, providing support and information tools, encouraging climate change adaptation and a reduction in customer greenhouse gas emissions though insurance products and premiums. For example, through emails and microsites offering practical guidance to customers, text or radio alerts about extreme weather events, and motor insurance initiatives offering bikes as alternative to rental cars.

Further details of case studies are available on the ABI website.


Last updated 01/07/2016