COP26 highlights insurance industry's role in tackling climate change | Insurance Business Australia
Almost 200 countries have agreed to the Glasgow Climate Pact at this year's COP26 climate summit – and, of course, the insurance industry is one of the industries committed to addressing climate change.
Held in Glasgow, COP26 is the 2021 United Nations climate change conference that enabled world leaders in various industries and countries to discuss how to address climate change and its impacts.
During the conference, 190 countries agreed to the Glasgow Climate Pact at COP26 to “phase down” coal, deemed the biggest industrial source of greenhouse gas emissions, and develop stronger climate plans in 2022.
The conference also finalised the most contentious elements of the Paris Agreement rulebook, including what the international rules should be for trading emissions reductions, known as Article 6.
COP26 allowed insurers to showcase their expertise in weather and climate modelling and risk management to help those most at risk from climate change build resilience.
According to S&P Global, insurers own nearly 10% of the world's invested assets, so they will be influential in determining how capital will flow toward sectors, projects, and technologies that will help achieve 1.5°C.
The global market intelligence firm explained that initiatives such as the Insurance Development Forum, Global Resilience Index Initiative, and the Global Risk Modelling Alliance will help insurers leverage their expertise in working with governments, multilaterals, and local communities to improve their ability to assess, measure, and ultimately reduce their risk from climate change.
Read more: COP26: How can the insurance industry help the world fight climate change?
S&P Global expects insurers to develop products and policies that can protect businesses and investors in these technologies as they develop and grow to economies of scale that make them more competitive than traditional practices.
Meanwhile, the non-life industry is expected to play a crucial role in helping to de-risk the economy's transition to zero carbon as nascent and new technologies, such as renewable energy, carbon capture, and storage, or more sustainable building materials are needed to achieve the Paris targets.
During the COP26 climate summit, some insurers shared solutions to address climate change. AXA XL, for example, announced that it launched a new innovative tool that maps current and future flood hazards resulting from climate change and integrates the protective benefits of coastal ecosystems into insurance risk models.
Called Coastal Risk Index (CRI), the new tool was developed by AXA in partnership with its scientific partners. It assesses coastal flooding in the context of climate change by comparing scenarios with and without coastal ecosystems, such as coral reefs and mangroves, to help the industry come up with nature-based solutions.