A Switzerland-based international NGO has stressed the importance of insurers in incentivising biodiversity loss, calling on them to integrate biodiversity and climate risk properly within their business activities.
WWF Switzerland launched a new report on Wednesday, co-written by consultancy firm Deloitte, which explored how the insurance industry is perceiving nature loss as well as the impacts of climate change.
“Insurance companies are particularly affected by these [wildfire and heatwave] events as cost increase is leading to greater payouts and entire regions become uninsurable,” said Thomas Vellacott, CEO of WWF Switzerland.
“It’s high time insurers address these risks and align their underwriting business with global climate and biodiversity goals.”
In response to the extreme impacts of biodiversity loss and climate change, insurance firms are increasing premiums, but they are generally not effectively considering the two crises more broadly within their business activities, the report emphasised.
Flood insurance costs in Florida are expected to double this year and in California three insurance companies have stopped underwriting new policies for home insurance, the report said.
Approximately $125 billion of economic losses from natural disasters were insured, and the reported figures didn’t include non-monetary harm to people and nature, according to the authors.
With $6.86 trillion in gross written premiums, the report authors said insurance companies are an “economic heavyweight” with enormous potential to reduce the negative impact of climate change and nature loss through their underwriting business.
“The insurance industry has the power to play a leading role in our effort to work towards a sustainable future. With their reach to all industries, insurance companies have the ability to incentivise sustainable practices and promote responsible behaviours of its customers,” said Marcel Meyer, head of Deloitte Switzerland’s sustainability services, in a statement.
“By incorporating environmental considerations into their business practices, insurers can help protect biodiversity, mitigate climate change, and build a more resilient and sustainable future,” Meyer added.
The report contended that insurers can take a number of actions at the corporate level as well as throughout their business activities.
At the corporate strategy level, companies can engage with corporate nature-related disclosure frameworks, such as the Taskforce on Nature-related Financial Disclosures, as well as collaborate with industry initiatives, including the Science Based Targets initiative, it said.
To encourage positive impacts, the insurance sector can promote nature-based solutions and restoration of natural assets with novel underwriting products, as well as incentivising environmentally friendly practices, for example in the agriculture and construction sectors.
WWF said that insurers can reduce negative impacts, not just incentivise positive outcomes, and proposed including environmental safety standards within terms and conditions, backed up with remote-sensing monitoring.
Insurers could also have exclusion clauses for companies that risk damage to high biodiversity sites, such as UNESCO World Heritage sites, and exclude companies from certain industries that cause deforestation or expand oil, gas, and coal, the report said.
By Tom Woolnough – tom@carbon-pulse.com
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