The following is an editorial by Alicja Grzadkowska, senior news editor at Insurance Business. To reach out to Alicja, email her at [email protected]
During the coronavirus pandemic and resulting government shutdowns, the International Energy Agency has estimated that as many as 2.6 billion metric tons of carbon dioxide emissions – around 8% of the estimated total for the year – will never be emitted into the atmosphere.
As lockdown restrictions start easing, leaders in some countries are trying to continue taking positive steps towards greener economies while keeping new breakouts of the virus to a minimum. This can be seen in places like Paris, which is promoting cycling amongst its population by introducing 650 kilometres of new bike paths. Meanwhile, as governments put together stimulus packages, economists predict that environmentally friendly policies could play a factor in determining which industries get financial help.
The insurance industry shouldn’t be ignoring the ‘green’ discussions that have arisen as a result of the pandemic. In recent years, many insurers have taken steps to address underwriting and investments related to thermal coal and oil sands, while some are going even further with their environmentally friendly policies. Recently, Allianz updated its coal insurance restrictions with a new policy. Besides the previous exclusion of insurance for new coal-fired power plants and mines, the insurer will now no longer offer property and casualty insurance for companies whose business model is largely based on coal and which do not have a clear coal exit path from 2023.
These type of divestments aren’t the only green-related concerns that should be top of mind for insurers. Amidst the pandemic, international non-governmental organisations supporting the Unfriend Coal campaign are urging insurers to champion a green recovery from COVID-19. In fact, 25 NGOs from 11 countries wrote a letter to insurance associations whereby they argued that the industry was fully aware of the risks of global pandemics years ago, but didn’t do enough to ensure governments prepared effectively.
The letter went on to warn the industry not to make the same mistake when it comes to the climate emergency and called on insurers to address the coronavirus and climate crises together. The letter suggested insurers work to ensure that economic stimulus plans are consistent with limiting climate change to 1.5 degrees Celsius, in line with the UN Intergovernmental Panel on Climate Change’s recommendations.
In a release, Peter Bosshard, coordinator of the Unfriend Coal campaign, went on to pinpoint the similarities between insurers’ stance towards climate change and the coronavirus.
“Seven years ago they recognised the threat of a global pandemic, but failed to ensure the world was prepared and simply excluded pandemic risks from their policies,” he noted. “Now that they acknowledge climate change is our greatest threat, they must not repeat this mistake.”
As businesses emerge from the coronavirus shutdowns around the world, insurers have a responsibility to prepare their policyholders for future pandemics, especially considering that a second wave of COVID-19 is expected in the autumn and potentially sooner as countries experiment with raising restrictions and implementing contract tracing to identify new outbreaks.
In the same vein, the industry needs to recognise that it has to do its part to mitigate the risk of the looming crisis of climate change that has already exposed businesses, governments, and individuals to a whole host of intensifying risks. The connection between COVID-19 and climate change policies becomes even clearer considering that climate scientists have determined that warming climates and increasing variability in weather patterns around the world have made it inherently easier to transmit diseases of any origin.
Standing up to climate change means divesting from some of the world’s biggest polluters as well as refusing to provide coverage for these companies and their controversial projects. By taking on the task of preparing insureds for another virus while also taking a stance against another looming threat, the industry can truly live up to its mission of protecting people and businesses from the risk of significant financial loss.