Media Coverage
Insurance Industry Launches Climate Initiative
13/09/2007 By Nicky Burridge | The Press Association
The insurance industry today launched a major initiative to help tackle climate change and encourage consumers to be more environmentally friendly. Sixteen global insurers, reinsurers and brokers have developed a series of principles which aim to do everything from reduce the environmental impact of their own businesses to rewarding customers for cutting their own greenhouse gas emissions. The groups claimed the ClimateWise principles, which a further 21 insurers have signed up to, would enable companies throughout the world to build climate change into their business operations.
The principles aim to encourage more environmentally friendly behaviour among consumers by creating more products that reward this, such as lower motor insurance premiums for those who drive hybrid cars.
It will also encourage people in areas that are at a high risk of flooding to repair their homes in a more flood resilient way, such as by putting in concrete rather than wooden floors.
The Association of British Insurers (ABI), which is launching the principles at a conference on climate change today, said taking measures such as these would enable insurers to continue making insurance more widely available in high risk areas.
Firms will also be incorporating climate change issues into their own investment strategies, encouraging the companies they invest in to adopt climate friendly behaviour and disclose their greenhouse gas emissions.
Insurance companies invest the premiums they receive into equities, giving them considerable financial muscle, with them currently holding just under a fifth of all investments in the London Stock Exchange.
Insurers will also be taking the lead in analysing the risk of climate change, looking at everything from the increased chance of severe flooding, to the possibility that severe droughts in the south of the country could lead to more deaths.
The industry will also be supporting more accurate national and regional forecasting of future weather patterns as a result of climate change, with this data being used to set premium levels and assess the capital reserves insurers need to hold.
The ABI said it would be sharing its research with scientists, business, governments and non-governmental organisations, and supporting work to set and achieve national and global emissions reduction targets.
The industry will also be aiming to get its own house in order, with participating firms having to publish an annual statement on what they are doing to implement the principles.
An independent audit will also be published on an annual basis assessing how well the industry is doing.
The ClimateWise principles have been developed during the past nine months in association with the Prince of Wales' Business and the Environment programme.
Peter Hubbard, chief executive of AXA Insurance and chairman of the industry working group that drew up the principles, said: 'The responsibility for addressing global warming rests with us all and will require co-operation and agreement amongst individuals, businesses and countries.
'It is this spirit of co-operation that has led us to agree the ClimateWise principles and to take the lead in raising this issue.
ClimateWise demonstrates the importance this industry attaches to this challenge. The principles set a framework for us taking up this exciting challenge of changing behaviour, raising awareness and encouraging new ways of working.''
The ABI said insurers were also trying to respond to consumers, after recent industry research showed that four out of 10 consumers wanted to be more environmentally friendly, but only around 1% felt able to.
It added that more environmentally friendly products were likely to become available during the coming year.
In a report also out today F&C Asset Management said insurers needed to wake up to the risks of climate change.
The investment group said the magnitude and frequency of extreme weather events such as hurricanes, floods and fires looked set to increase as a result of climate change, and this would put insurers in the 'eye of the storm''.
But it claimed that some insurance companies had been slow to act and urgently needed to develop climate change strategies.
The group also claimed that traditional risk models, that have relied on historic claims data to price forward-looking risk, were an increasingly unreliable guide to the future due to the impact of climate change.
It warned that this could lead to risk being 'systematically underpriced'' and could significantly impact on the profitability of the sector.
Co-author of the report Vicki Bakhshi said: 'By acting now the insurance industry can play a key role in shaping and financing the solutions to climate change.
'Insurers can work with governments and regulators to get the right conditions in place both to maintain a healthy insurance industry, and to help society cope as climate change hits home.''
--Ends--