Insurers’ underwriting fuels climate change and nature loss – WWF and Deloitte
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Many of the economic activities underwritten by insurance companies are fuelling climate change and biodiversity loss rather than addressing them, a new report by wildlife charity WWF Switzerland and consultancy Deloitte Switzerland has found. The two are calling on insurers to nudge customers towards greener behaviours, and say policymakers and regulators can facilitate this.
The report, ‘Underwriting our planet: how insurers can help address the crises in climate and biodiversity’ covers a range of non-life underwriting fields, such as liability insurance, marine and vehicle insurance or property insurance with real-life examples from various industry sectors, says insurers’ actions on the environment fall short of what is needed, and suggests ways to achieve global climate and biodiversity goals.
“While there is an overall increasing awareness of the considerable risks caused by extreme weather events, the insurance sector is barely addressing how the underwriting business is contributing to those risks,” according to the two organisations, which are calling on insurers to speed up the transition to a net zero and nature positive economy.
"This summer, we witnessed devastating heatwaves and wildfires across Southern Europe, Northern Africa, Asia and Northern America. Insurance companies and their clients are particularly affected by these events as they lead to greater payouts and entire regions become uninsurable. It´s high time insurers address these risks by aligning their underwriting business with global climate and biodiversity goals to protect what is of value for our future,” said Thomas Vellacott, chief executive of WWF Switzerland.
Deloitte Switzerland’s head of sustainability, Marcel Meyer, called on insurers to nudge their clients into more environmental behaviours.
“With their reach to all industries, insurance companies have the ability to incentivise sustainable practices and promote responsible behaviors of its customers,” Meyer said.
The two organisations note that last year, global economic losses from natural disasters were about $275bn, but only $125bn of the total loss was insured. The insurance gap could grow as insurance companies are increasing premiums, limiting coverage or completely withdrawing from markets in response to the frequency of natural disasters.
They say policymakers and regulators should help insurance companies reach global climate and biodiversity goals by aligning insurance regulation, policies and supervision with recommendations by the WWF.
The charity recommends insurance companies implement the following measures in their underwriting business:
- Commit to net zero greenhouse gas emissions by 2050 and align the underwriting business with global biodiversity goals and publish and implement corresponding transition plans.
- Engage with clients and insurance brokers to align with those goals, and advocate for a fast, green and fair transition.
- Promote green and resilient choices by clients through the design of insurance products and during claims management processes, for example, offering new products for renewable energy or recycling projects and nature-based solutions, as well as incentives for homeowners to (re)build to the highest sustainability standards and favouring 'repair over replace' during claims management.
- Review environmental liability policies to eliminate harmful incentives that impact the environment and people and instead require clients to adhere to the highest environmental standards.
- Exclude the most environmentally harmful economic activities and sectors from insurance policies, such as projects expanding fossil fuel supply, deep sea mining, deforestation or illegal, unregulated and unreported fishing.
- Communicate phase-out of insurance coverage of any fossil fuel-related activities in line with the International Energy Agency’s Net Zero Emissions by 2050 Scenario.
Do you agree that underwriting practices need to change to align with net zero and biodiversity goals?
