Why insurance is vital to climate change preparation

Why insurance is vital to climate change preparation | Insurance Business

Why insurance is vital to climate change preparation

The conversation around climate change is moving fast, and a series of questions as to how we plan and prepare for the future are being debated at the highest levels. When it comes to analysing risk and working on preparedness, the government says the insurance industry is an invaluable part of the puzzle, and can help seriously drive New Zealand’s resilience.

According to Vicky Robertson, Secretary for the Environment, conversations between government and the insurance sector have sometimes been “difficult.” However, she says starting this collaboration is vital to addressing climate change as an economic issue.

“The world is changing, and it’s changing fast,” Robertson said.

“Insurance is in the business of anticipating ‘future history,’ so insurance can bring a lot to the conversation of how we think about risk, and what that risk will look like in the future given the cumulative effects of things that are happening in the environment. We’re going to have to think differently to how we’ve done in the past.”

“When I was in the Treasury, I have to say it was a difficult conversation with the insurance industry around who bears the risk and whether the government should just guarantee support,” she explained.

“From a policy perspective, the architecture is also changing.”

Robertson noted that the Zero Carbon Act, passed in November 2019, puts a whole different framework around the Paris Agreement, and one that is required for the country to meet the targets in the legislation. The government is also conducting its National Climate Change Risk Assessment, which is expected to be complete in mid-2020. When it comes to facing the risks, Robertson says the time for lack of action is over.

“The assessment intended to be a national overview of the risks facing New Zealand, presented in a way that we haven’t done to date,” Robertson said.

“There’s a lot of work yet to do, and from my perspective, the conversation is still a little limited. The idea is still that the market will just sort itself out, and that those facing things like sea level rise will just bear that risk and be alright.

“I think that idea has had its time, and there’s a lot more interest in what we can invest in for the future, and what the commercial sector can do to finance a different transition.

“There’s lots of change happening, and a lot of our environmental issues are not just environmental – they’re economic too.”