The insurance and private finance sectors play a vital role in meeting the challenges posed by the climate crisis: together they hold the data – and the finance – to help build resilience.
This was the viewpoint raised by participants during the session ‘Stewarding the Transition: The Role of Insurance in Enabling Resilience’, a lively and thought-provoking debate moderated by Michel Liès, Chairman of Zurich Insurance and Deputy Chair of the Insurance Development Forum (IDF) Steering Committee.
Held on the second day of the virtual IDF Summit 2021 on 7th and 8th June, the session highlighted the social and economic issues presented by climate change – and how insurance fits into it.
“Since 1979 people have been warning of climate change, and now we are at a tipping point; we are seeing the consequences,” Christian Mumenthaler, CEO Swiss Re said. “[When] a disaster happens, donors scramble together to get the funds; it can take six months, then they don’t know how to spend or distribute it. A better system is to determine in advance the risk, and to pre-agree finances and distribution; it’s called insurance.”
Applying the framework
Despite the role that finance plays in helping build resilience following a disaster, there is still a protection gap; and in developing countries where a crisis can have a far greater impact, this gap is continuing to grow.
“We have a joint responsibility to protect vulnerable people,” Ingrid-Gabriela Hoven, Managing Director Deutsche Gesellschaft für International Zusammenbeit, said. “We have to leverage funding that is available in the public sector and the insurance industry. This is a window of opportunity to scale up and provide a bigger and more sustainable protection scheme for poor and vulnerable people.”
Although the solution seems simple, as Hoven explained, applying a framework from a developed country onto a developing country is not a straightforward process. Providing pre-arranged finance following a climate-related disaster needs a combined effort; it is, as the speakers agreed, about ensuring there is enough level of coverage, risk management and skills to model and determine the right products.
An opportunity for scale
As Liès pointed out, for the insurance industry, this isn’t just about investments, but the power of its underwriting and the requirement to start identifying companies with good intentions – and also the ones who don’t.
“At this moment in time, the insurance industry can help financial markets invest more in a risk-managed and resilient economy,” Achim Steiner, administrator UNDP and Co-Chair IDF Steering Committee added. “This is an extraordinary opportunity to leverage, multiply, and to scale, but also to drive the frontier of insurance markets towards the real challenge of the 21st Century – which is not just property and livelihoods, but the systemic risks. If we cannot find a way of managing these risks then they will break us.”
To access the IDF Summit 2021 sessions in the On Demand Library, please register here, or if you attended the event, please use the same unique link you received when you registered to access the site.
11th October, 2021