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The role of the insurance industry in combating climate change could be a win-win


The conclusion of the 26th Conference of the Parties (COP26) last week in Glasgow led to a series of media briefings. There was good, as an unexpected promise [1] of climate change cooperation between the United States and China; there were negatives, including Australia’s refusal to be removed [2] from coal and gas emissions; and it got worse, as when President Joe Biden shouted [3] Xi Jinping of China and Vladimir Putin of Russia for failing to attend the conference in person.

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But another unreported area is the role of the insurance industry in trying to curb climate change. Industry leaders have discussed [4] how insurance providers can play a role in tackling this global challenge, not only because the increase in losses due to the impact of the weather gives them interest to do so, but also because the insurance industry’s position in the market empowers them. relocation of customers who do not want to go to a zero-future future. While the views of the leaders of one industry were flawed, others deserve special attention by both policy makers and insurance companies.

One thing is certain: unemployment is costly. Climate change has resulted in the most common, most severe natural disasters that plague the industry. According to a 2015 report [5], property damage from natural disasters increased from an estimated $ 9 billion to $ 24 billion a year from 1993 to 2015. That is a threefold increase, and looking at the state of the world in 2021 shows no improvement. . Amid wildfires in the West [6], floods in the mid-Atlantic [7], hurricanes from Louisiana [8] to Rhode Island [9] and rare snow in Texas [10], natural disasters cost insurers billions of dollars in losses. -and it may be the worst in the next ten years.

That is not good news for insurance brokers, and risk is only associated with their exposure to the other side: their investment. According to one editor, [11] 35 percent of insurance assets are confined to carbon-based industries, such as coal, oil, and natural gas. S&P Global has invested carbon-based industry investments at $ 582 billion [12] by 2019, representing an increase of $ 63 billion by 2018. ‘assets will also suffer.

Therefore, government officials in charge of industry propose to start negotiations with insurers, not on how climate change will affect their industry, but how – and how they respond to risks. Finally, belief in climate change and its human causes is irrelevant. What matters is what the industry β€” from regulators to insurers β€” has to do with climate change.

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