Now is the time for the insurance industry to stand up and take action, says Matt Scott
By Matt Scott
The rising threat of climate change has once again been filling countless column inches as a severe heat wave sweeps across Southern Europe and Northern Africa, leading to widespread wildfires and, sadly, a number of deaths.
Unfortunately, the very real threat presented by our planet’s changing climate has become all too apparent in recent years, with extreme weather events and associated secondary perils becoming increasingly frequent and more costly.
Indeed, research from Swiss Re, published in March 2023, described the current scenario as “a perfect storm”, with global economic losses from natural disasters rising to $275bn (£217bn) in 2022, of which $125bn (£98bn) were covered by insurance.
This makes 2022 the fourth highest year for natural catastrophe insurance losses since records began in 1970, with losses some 54% above the 10-year average and the first time ever that costs have exceeded $100bn (£79bn) for two consecutive years.
Despite the stark – and worrying – nature of these figures, climate change has been on the insurance agenda for a number of years now, but there is still much more that is needed to be done if the industry is able to have a positive impact.
Earlier this year the insurance industry hit the headlines for all the wrong reasons as insurer after insurer withdrew from the Net-Zero Insurance Alliance – a UN-backed environment programme aimed at decarbonising insurance and reinsurance underwriting portfolios.
Whatever the reason for these withdrawals, it is simply not good enough for these commitments to be left empty and efforts must now be redoubled to get the industry back on track.
Aside from the ethical benefits of helping to protect our planet and those that live on its surface, the insurance industry also has selfish reasons for combating the threat of climate change.
Put simply, left unchecked, climate change could create existential threats for many lines of business across the world, creating uninsurable assets that are simply not practical to insure against the threat of extreme weather events.
This is not a situation that anyone wants to find us in – not the insurance companies whose profits are derived from offering this protection, nor the companies, families and individuals that rely on insurance to protect their businesses and homes from the threat of climate change.
So now is the time for the insurance industry to stand up and take action. Otherwise, it very well could be too late.