The following is an editorial by Alicja Grzadkowska, senior news editor at Insurance Business. To reach out to Alicja, email her at email@example.com.
In the fight to limit the impacts of climate change on communities around the world, there is a small, but significant thorn in the side of the scientific community – and that is the voice of climate change deniers.
While a YouGov survey from 2019 revealed that it’s only a minority of people around the world who deny the impact that human beings have had on the climate, there are, in many parts of the world, powerful individuals who are likewise questioning the validity of this ‘scientific fact’, and, in turn, have implemented policies and regulations that, at the very least, prompt political inaction on the climate change front.
The insurance industry and catastrophe risk management communities thus have their work cut out for them when it comes to challenging these beliefs and demonstrating the intensifying impact that natural catastrophes are having around the globe, as well as helping businesses and homeowners prepare for coming catastrophes.
Insurance giants are playing a part in climate conversations by launching initiatives, such as Zurich’s Climate Change Resilience Services, to help businesses better prepare for current and future risks related to climate change, and aligning themselves with the Paris Climate Agreement, which Suncorp in Australia recently did when it decided that it will stop financing and providing insurance to the gas and oil industry by 2025 – a move that adds to the group’s ban on supporting new coal projects.
However, many effects of climate change are out of the insurance and risk industry’s control, and work against the interests of the industry as it strives to remain profitable. For instance, property insurance markets in California are seeing limited capacity due to the devastation caused by wildfires and the fact that this disaster isn’t going away any time soon. A consumer group recently called out insurers in California, which, it believes, have arbitrarily refused to sell or renew homeowners’ insurance coverage in that state.
Meanwhile, Lloyd’s of London offices in the UK were the target of an ‘Insure Our Future’ protest when they reopened in September. Activists believe that the market must “wash its hands of coal and tar sands” in a bid to protect the climate, and have criticised Lloyd’s for not taking meaningful action on climate change, arguing that Lloyd’s is “undermining the positive climate action of other insurers.” Moreover, a report from the ‘Insure Our Future’ campaign last year suggested that Lloyd’s has become the “insurer of last resort” for fossil fuel projects.
As an industry that has a front row seat to the devastating impacts of climate change-related events on businesses and individuals across the world, insurance and risk leaders must make a more pronounced effort in aligning themselves with pro-environmental messages and actions, and speaking out against those who would deny that climate change is happening, when the industry has the data to easily refute this claim and should be doing so at every opportunity.
They also would do well to step away from insuring industries that are damaging the planet, and continue looking for private-public partnerships to ensure that people can find property coverage or help develop other solutions to address insurance gaps that have opened up as a result of widening exposures in natural catastrophe-prone areas. This is similar in many ways to what some insurers are currently doing with pandemic insurance, since coverage for this risk is now widely excluded.
What’s different in the case of climate change is that scientists have been highlighting the climate risks facing the planet for years now, which has given leaders a head start in preparing for the impacts. In the case of the climate, the insurance and risk industry shouldn’t wait until a coronavirus- level crisis hits their insureds to take definitive action on this front.