Howden and Boston Consulting Group (BCG) have jointly published ‘The Bigger Picture’ report, which shares research on the role of insurance in mobilising the climate transition.
According to the findings, over half of the $19 trillion already committed to financing the climate transition through to 2030 will require additional insurance coverage.
The report also outlines that insurance premiums for climate resilience and natural catastrophe protection are set to increase by 50 per cent by 2030, reaching $200-250 billion as a result of:
- Increased annual losses caused by climate events,
- Accelerated growth in exposures,
- Climate risk disclosures and governments transferring risk to private markets.
This will place unprecedented structural pressure on insurance systems across public, private and mutual markets and there is no guarantee that the market will meet this demand, the report outlines.
The paper warns that insurance will require a paradigm shift in how risk management is prioritised if climate finance is to be deployed and businesses are to secure their futures.
The report calls for business leaders recognise that insurance is an “essential enabler” of climate transition and adaptation strategies and elevate decision-making around insurance to the boardroom level.
It stresses the importance of engaging with the insurance industry from an early stage to enhance the bankability and insurability of their business’ climate transition journey.
It was also underlined that companies should assess their exposure to physical risk to make fully informed decisions about investments and the implementation of resiliency measures.
Meanwhile, the report says that the insurance industry should ensure that both the products and the capacity that businesses need will be available as the global economy adapts to meet the climate challenge.
It recommended providing risk consulting, risk engineering and analytics services aimed at increasing businesses’ understanding of climate risk and integrating that understanding into long-term strategies.
It also called for the industry to take a central role in the de-risking discussion within the financial community to enhance the insurability and bankability of the response to climate change.
For the full report, head here.