Insurers are racing ahead on sustainability – but many of their clients are still treating it like a reporting exercise rather than a business imperative.
Chris Cornell (pictured right), partner and national sector leader, insurance at KPMG Canada, says that while most insureds “want to do the right thing” on climate and sustainability, the real driver for them has often been compliance, not strategy.
“The impetus for them has been more on regulatory reporting, meeting those requirements, than it being embedded into their business models,” he says. For non‑insurance businesses, the pressure has largely come from disclosure rules and reporting frameworks, rather than from a hard look at how climate risk affects their core operations.
That means ESG is frequently bolted onto existing structures instead of being built into how the organisation prices risk, allocates capital or designs its processes. As a result, Cornell said, the share of insured companies that have genuinely embedded sustainability into day‑to‑day decision‑making is still well behind what he and his colleagues see inside the insurance sector itself.
Jonathan Weir (pictured left), a partner at KPMG focused on the insurance sector, argues that insurers simply don’t have the luxury of treating sustainability as a side project. In the property and casualty space, he notes, the impacts of climate and other sustainability risks “show up very obviously in the financials.” You only have to look at the book of claims, the exposures being modelled, or the rising cost of reinsurance to see what it means when sustainability is (or isn’t) built into the business.
For insurers, that starts with product design and underwriting that improve portfolio quality and nudge clients toward more sustainable behaviours. From there, Weir adds, it naturally extends into corporate operations, from how offices are run to how claims dollars flow through the supply chain. Because carriers send so much money out through their claims vendor networks, they have real leverage over how and where those funds are spent – and are increasingly using it to advance their sustainability strategies.
And while many insureds are still wrestling sustainability into their governance and reporting structures, insurers themselves are already moving into a more technical, AI‑driven phase.
Asked what the growing reliance on AI for climate modelling and scenario planning looks like in practice, Weir points first to the sheer range of perils Canadian carriers now have to grapple with. Depending on the region and portfolio, insurers need to model wind, hail, wildfire, flood and even earthquake risk – often in combination. Historically, he says, the computational ability to model and predict how these events behave, especially in a single jurisdiction with multiple overlapping perils, was limited.
That’s changing fast. “What it looks like in practice is the level of sophistication and the approach and the use of tools internally,” Weir explains.
A new generation of vendor models – many built outside Canada – is beginning to give insurers access to much more granular and powerful tools. Wildfire modelling in particular has historically been less developed in Canada, with vendors now working to bring more sophisticated solutions to market.
At the same time, flood models are becoming more accurate and precise than the tools the industry has relied on in the past.
For Weir, this is less a revolution than an evolution: the basic risk‑modelling approach is familiar, but the capabilities sitting underneath it have stepped up dramatically. Insurers are increasingly able to run scenarios and stress tests that were simply out of reach a few years ago, particularly as they combine new vendor tools with their own internal data and expertise. “Things that you weren’t able to predict and solve for and model in a sophisticated way all of a sudden are becoming options,” he says, adding that most major Canadian carriers are actively exploring how to bake these AI‑enabled models into their planning cycles.
