Insurers can play leadership role in helping the financial sector to become more eco-friendly, experts say
Climate change has fast become one of the hottest topics within the political and financial worlds.
Just last week in the Queen’s Speech, Prime Minister Gordon Brown announced the UK will be the first country in the world to have legally binding emissions targets under the Climate Change Bill.
The bill sets out an action plan to reduce carbon emissions in the UK by 60% by 2050.
Insurers themselves have pledged their own support in reducing carbon footprints and considering eco-friendly risk management solutions, but the question is can they have an impact?
If some of the industry’s top players are to be believed, then yes, insurance can play a vital role in reducing pollution and carbon emissions walloping the environment.
Paul Pritchard, corporate responsibility manager for Royal & SunAlliance, said one of the most significant contributions insurers can make in battling climate change is through the role of messenger.
He said: “When you start to look at the influence we have along the supply chain our impact becomes more important. We are seen as messengers of weather and climate extreme events.”
Insurers can help companies and policyholders adapt to a changing environment by offering advice and coverage to meet risks caused by climate change.
Allianz Group has been very vocal in plans to tackle climate change, acknowledging the benefits for both policy holders and insurers in doing so.
In a previous statement Joachim Faber, Allianz board member and chief executive of Allianz Global Investors said: “Climate change creates significant costs for the financial industry. In the interest of our clients and shareholders we are obligated to take these risks into account when making decisions on insurance underwriting, investments or lending credit.”
Allianz has teamed up with the World Fund for Nature (WWF) to research climate change.
The research showed that the financial industry, including insurance, plays a pivotal role in reducing climate change risks.
As such, the group, established a five-year action plan to address climate change risks and opportunities which included: reducing carbon emissions by 20% by 2012, developing tailor made climate change related products for customers and climate related risk management.
At a UK level, Allianz is currently looking into implementing a program that would see policyholders receive excess waivers in exchange for using recycled parts to repair vehicles.
Allianz is not alone in its attempts to tackle climate change.
AXA is working on the development of a carbon footprint calculator for SMEs, along with a guide to reducing pollution. Successful implementation of the program could lead to premium reductions.
It would be foolish, however, to think insurers will adopt environmentally friendly policies at the risk of losing money and as such, the cost/benefit of all new programs will have to be weighed.
But many in the industry say climate change can provide a host of new business opportunities and potential product lines.
Pritchard said that insurance will play a key role in the successful implementation of renewable energy, bio fuel and wind initiatives.
It would be practically impossible for organizations to secure loans to develop these sectors without insurance.
Insurers will also benefit by adding new eco-friendly arms to older product lines.
Pritchard said: “The impact insurers can have is very significant.”