The first ever Climate Change Summit for Asia’s Insurance Industry was held last week in Singapore, bringing together leading global and Asian industry players.
With its long history of having to manage the risks associated with extreme weather events such as floods and droughts, the insurance industry is the business sector best placed to understand the economic impact of climate change.
Andrew Voysey, Programme Manager at ClimateWise, one of the organisations supporting the event, spoke with Eco-Business about how the non-profit organisation enables the insurance industry to best manage risks and opportunities associated with climate change.
BP: What is ClimateWise and what are its objectives?
AV: ClimateWise is a global collaboration of insurance organisations around the world, coming together to deliver actions to reduce the effects of climate change. This is an initiative specific to the insurance sector, and specific to climate change as an environmental and social issue.
I work for the University of Cambridge’s department called the Cambridge Programme for Sustainability Leadership, which for the last 20 years – and now under the Patronage of His Royal Highness The Princes of Wales - has been working on the big environmental and social issues affecting the business and public policy communities, helping to advance understanding and facilitate leadership.
ClimateWise brings together leaders around the world within the insurance industry to collaborate amongst themselves, with other key stakeholders like governments and NGOs to help reduce the risk of climate change. It is a business-led initiative, with a board and a chair made up of insurance companies. The University of Cambridge comes in as the Secretariat, and we provide this function for a number of other similar groups as we’re well placed to draw on the academic expertise – climate science, engineering science, psychology of risk and so on – within the academic community, as well as our vast experience of working with leaders from the business and public policy community around the world on such issues.
BP: How serious is the insurance industry in responding to climate change?
AV: We are working with 40 insurance companies at the moment, and that’s primary insurers and re-insurers, as well as all the brokers and risk modellers – the value chain of the insurance industry. These companies are from Europe, Asia, Africa and North America. By becoming a member of ClimateWise, they have committed to the core principles – which are broad and holistic and cover all the aspects of an insurance organisation’s core business that are material to the climate change agenda. These are aspects of the business that affect the climate or aspects of the climate that affect the business. There are six principles here which cover risk analysis, working with policy makers, working with customers, working with investment strategy, reducing environmental impact, and reporting on actions they are taking.
BP: How serious is the insurance industry in responding to the challenges of climate change?
AV: More than 40 insurance organisations have signed up to ClimateWise’s Principles. These companies are voluntarily signing up to show their commitment, to demonstrate their leadership. Every member produces a report every year which we get independently reviewed by a third party. For two years, that was a UK based charity called Forum For the Future. Last year it was PWC to review all the reports, to determine how well the ClimateWise membership is complying against its own principles. This is now the most objective measure of leadership we can get in this industry, including a rating system. For the three full years that we have been running the initiative so far, there has been a year on year improvement in the level of compliance across the membership.
BP: How are businesses responding?
AV: Through the Cambridge Programme for Sustainability Leadership, we work with a number of industries, particularly high energy intensive ones that the insurers are insuring, and need to be part of the solution to deliver a low carbon economy. In ClimateWise, we don’t tend to work directly with those organisations, but you can see that all of the insurers who sign up take on a commitment to work with those companies as their clients, to help them reduce their emissions, so that their businesses are resilient to the effects of climate change.
This is where one of the most exciting aspects of the industry’s potential leverage is, but it is a role that is not fully realised. There is a long way to go.
BP: How do you quantify climate change risk?
AV: That’s a complex question, and it depends on why you are trying to calculate that. If you take a pure scientific approach, the question would be how would we know which hurricane in hurricane season would not have happened if it hadn’t been for man-made emissions. That’s very, very difficult. If you’re able to answer that question, you’d be able to measure a number of extreme events that were created by anthropogenic climate change.
Pure scientists are saying you can’t do that now, and will not be able to work that out for hundreds of years, because of the complexity of the way the atmosphere works. What we can do, which is what the insurance industry is measuring and showing to policy makers and the world, is show the increased value and losses that we as a global society are experiencing as a result of natural catastrophes. So you can find from the global reinsurers graphs that show the increasing losses, year on year due to natural catastrophes. Nobody should try to pretend that all those increasing losses are entirely due to climate change.
We are also putting valuable assets in places where they shouldn’t be. If you look at plans for megacities over the next few decades, a lot of them are going to be coastal megacities at high risk of coastal flooding. That will be a driver of high cost of claims and not necessarily due to climate change per se. The role of the insurance industry would be to show how exposed and how vulnerable we are.
BP: What are your plans for Asia?
AV: Tokio Marine is Japan’s largest insurance company and they’ve been a member of ClimateWise for a little over a year now. Tokio Marine and ClimateWise would like to see a number of Asian insurance companies join the initiative. That’s not for a self-serving reason, so we can say we have more companies from Asia. ClimateWise is a non-profit initiative. Most of the economic growth that can come from Asia, is in the most vulnerable areas. We are going to need to see a significant collaboration between climate risk managers i.e., private sector insurers and public sector organisations, national governments and international and intergovernmental agencies to help developing economies protect their growth and the adaption to protect that development.
BP: What would you like to see in the next five years?
AV: If in the next five years, the five biggest insurers from all continents around the world adopted the ClimateWise principles – because they represent a broad range of actions that drill down to the material aspects of an insurer’s business and are validated by NGOs - that would change the behaviour of industry significantly and ripple down to other sectors.
The second thing that I would like to see is a lot more public private partnerships and collaborations with both sectors coming together to deliver risk reduction strategies at the country level to reduce vulnerability.
Organised by Asian Insurance Review and The Geneva Association, the summit was supported by Singapore’s National Climate Change Secretariat, the Prime Minister’s Office to create a stronger understanding about the risks and opportunities created by climate change in the region.
To access the ClimateWise Principles click here.
