Insurance
Europe, the European insurance and reinsurance federation,
unequivocally supports the collective global momentum to combat climate
change that is the focus of COP26. The European insurance industry also
supports the goals of the Paris Agreement and the European Green Deal,
as well as Europe’s ambitious targets to reduce its greenhouse gas
emissions by 55% by 2030 and achieve a net-zero economy by 2050.
Indeed,
the need for urgent action has never been more unambiguous and, as
demonstrated by the most recent IPCC report*, the costs of abatement,
mitigation and adaptation measures pale in comparison to the long-term
costs of unmitigated climate change.
Insurers can play a
significant role both in mitigating the worst climate-change scenarios
and in helping citizens and businesses to cope with and adapt to the
impacts of the changes that cannot be avoided and that will continue for
many years. Insurers can do this through:
- Their
capacity to take and diversify risks on behalf of customers and provide
them with the financial support they need to cope with the consequences
of climate change-related events.
- Their risk management
knowledge and expertise to help customers and the public sector to build
risk awareness and to reduce exposure and increase resilience to the
impacts of climate change, including through “building back better”
approaches after damage has occurred.
- Their capacity to invest
in the transition to sustainability, as they are the largest group of
institutional investors in Europe with over €10 trillion in assets.
Insurers
are already taking action and are willing to do more, as demonstrated
by the initiatives and coalitions in which many insurers are
participating. But to play their full part and to truly unleash the
sector’s significant potential, they need governments to take actions.
These include notably:
- Commitments to invest in
adaptation and prevention measures. Indeed, the adaptation and
prevention measures taken today will have a huge impact on what is
insurable in the future.
- Incentivising and supporting more
sustainable sovereign, corporate and infrastructure projects in which
insurers can invest, for instance by following and consistently applying
the “polluter pays” principle on an international level, by more
“crowding-in” of private capital through public-private partnerships and
by better balancing of credit risk associated with infrastructure
projects.
- Regulation, including prudential regulation, that supports — and certainly does not hinder — the insurance industry’s role.
- Policies to ensure that the transition happens in a fair and just way.
- More
public-private partnerships, as existing ones have demonstrated that
sharing expertise and experience between core stakeholders in the area
of climate resilience can make a difference.
- The creation of a
European ESG database so that investors have efficient access to the
comparable and reliable data that they need for sustainable investing
and reporting.
More information regarding the role of the insurance sector can be found in this annex, and examples of insurer actions can be found in our newly launched Sustainability Hub.
*IPCC report: “AR6 Climate Change 2021: The Physical Science Basis”, August 2021