It might have the reputation of being rather a dull − some might even say boring – business, but there’s no doubting the insurance industry’s financial muscle.
The Geneva Association − a leading international insurance thinktank, whose members have total assets of nearly US$ 15 trillion − has been meeting in Toronto, Canada. And the focus has been very much on climate change.
The Association, issuing a climate risk statement calling for urgent action by governments and other bodies, said: “The prospect of extreme climate change and its potentially devastating economic and social consequences are of great concern to the insurance industry.”
Those putting their names to the document – 66 chief executives of the world’s leading insurers − commit themselves to a set of guiding principles on what they describe as the substantial role the insurance industry can play in tackling risks related to climate change.
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In the face of the increasing economic costs caused by climate-related disasters, it is vital that the full potential of insurance and reinsurance is harnessed effectively
Shuzo Sumi, chairman of Tokio Marine
Low carbon projects
The insurers pledge to market insurance policies aimed at promoting the development of low carbon energy projects. They also say they will work to attract investors to such schemes, and use their combined investment muscle to promote low carbon initiatives.
The commitments made by the Geneva Association members are likely to have considerable impact on the development of low carbon energy projects worldwide. The availability of insurance is often a key ingredient in determining whether or not such schemes are implemented.
“In the face of the increasing economic costs caused by climate-related disasters, it is vital that the full potential of insurance and reinsurance is harnessed effectively,” says Shuzo Sumi, chairman of the Tokio Marine group.
Among other pledges in the risk statement, insurers say they will implement measures backing new building codes, with the aim of promoting energy efficiency and sustainability. They will also use their influence to encourage politicians to better understand the potential costs of climate change.
Uncertain era
The big insurance companies have spent considerable time and resources over the years investigating the likely impacts of climate change. A Geneva Association report last year warned of a significant upward trend in the insured losses caused by extreme weather events, saying the insurance industry was entering a new, highly uncertain era.
Speaking at the meeting in Toronto, Al Gore, the former US vice-president, said insurers had the capacity to influence policy makers on how to go about tackling climate-related risks, but argued that the industry must be more forthright.
“Now that our world is facing the gravest risks it has ever faced, the world should turn to insurers for advice,” he said: “In turn, insurers must be more vocal about the challenges they see.”
