Insurers should put their risk expertise and underwriting skills to better use and in ways that can help protect the environment according to a new report by Climate Wise.
The report says that insurers should do more at the underwriting stage to help protect the environment and not just after natural disasters. Launching a roadmap for insurers, ClimateWise said nature-related risks are not currently assessed by insurers and reinsurers. It says the impact on nature must be taken into account when underwriting climate and nature-related risks.
The value of nature needs to be integrated into underwriting to avoid irreparable damage to the natural world. The cost of not doing so is vast and understated,” the report said. It said insurers have a wider role to play.
“The insurance industry is built on the ability to quantify risks. Moving towards integrating nature-related risks and impacts into insurance brokerage and underwriting can be seen as a ‘natural’ evolution for the industry. The insurance industry can expand its role in society to support risk management through proactive nature-positive measures to help contribute to the protection and restoration of nature – both in advance of and in response to a disaster or loss.”
According to the report insurers are not proactively assessing nature-related risks because of lack of awareness and understanding, lack of data and skills, an insufficient policy environment and lack of buy-in from insurance c-suite decision-makers.
The report urges insurers to:
Develop more use cases and adapt present models in order to improve understanding and measurement of nature-related risks
Create new approaches to modelling and understand asset ownership in order to innovate in asset protection
Develop investment and insurance solutions, and prioritize major dependencies on nature to facilitate capital flows
Engage constructively with policymakers to create an enabling regulatory framework; and
Support customer and client education and engagement by incentivizing nature-positive behaviours.