How the global insurance sector can collaborate on climate risks

How the global insurance sector can collaborate on climate risks | Insurance Business New Zealand

How the global insurance sector can collaborate on climate risks

Increasing climate risk is one of the most significant issues of our time, and according to Swiss Re’s head of sustainability reinsurance Dr Gillian Rutherford-Liske, the insurance sector has a unique opportunity to offer insight, innovation, and advice to help protect some of the earth’s most vulnerable areas.

Dr Rutherford-Liske is an overseas New Zealander who recently spoke at ICNZ’s 2020 Speaker Series, and she says that from a global perspective, there is significant room for more partnerships and collaboration to address climate resilience. Indeed, she says that a lot of insurance companies have already made low-carbon commitments, and are looking seriously at the ‘carbon intensity’ of their underwriting portfolios.

“There’s an opportunity for us to lead as an industry, and one of the ways we can do that is through our own commitments to net zero,” Dr Rutherford-Liske explained.

Read more: Climate change could drive up weather damage claims – report

“Many insurers are committing to net zero, and that can come from our own operations, or in the form of exclusions and risks that we don’t underwrite. A lot of insurers and reinsurers are now excluding coal, and starting to implement policies on oil and gas.”

“We can also look at the carbon intensity of our underwriting portfolios and try to measure that, and then try to steer those portfolios towards net zero,” she continued. “We need to invest in data and analytics, and we need to support new technology to help our transition towards a low-carbon economy.

“Often with new technology we don’t have any loss data, but we do have the intel and the minds to develop ways to generate loss scenarios, and we can then use those to try to predict our losses and enable this new technology.”

Dr Rutherford-Liske says that global collaboration and partnerships are a crucial piece of the puzzle, as the global insurance space can develop innovative cover that has never been deployed before – often to great effect.

In one example, she noted that Swiss Re recently helped structure a coral reef cover for a local government in Mexico which triggers an automatic payment if the reef or sand dune system behind it becomes damaged, with that payment then being used to restore the reef.

Read more: Insurers reveal their biggest worry – major risk overtakes climate change

“The cover triggered a few weeks ago,” she said. “A tropical cyclone went slamming into that reef, the payment was triggered, and the restoration of that reef is happening as we speak. For me that’s total proof of concept, and proof of what the insurance industry can do to contribute towards climate resilience.”

“Multi-lateral partnerships and commitments are really important,” she added. “I see one country after another committing to net zero – China just committed to net zero by 2060, Japan and South Korea committed to net zero by 2050, New Zealand has done it, many other countries have done it. This sets the scene for a lot of public-private partnerships and addressing climate resilience.”