Executive summary

The insurance sector is deeply intertwined with nature, as demonstrated by the dependency of the global economy—worth US$44 trillion—on natural resources. In Australia, where 10 out of 18 ecosystems are at risk of collapse, the urgency for insurers to adopt nature-positive practices is critical to manage and mitigate inherent risks effectively.

Practical steps to advance nature-positive insurance in Australia

Australian insurers can strengthen their resilience and sustainability by adopting several practical steps:

• Identify and assess exposure: Evaluate the exposure to nature-related risks and opportunities across all operations.
• Embed nature into business strategy: Incorporate nature-positive principles into business strategies, considering both risks and benefits.
• Develop and offer nature-based solutions: Create insurance products that use nature-based solutions for asset protection and risk mitigation.
• Collaborate with stakeholders: Engage with governments, businesses, and communities to drive collective nature-positive outcomes.
• Advocate for nature-positive practices: Promote policies and practices within the industry that support sustainable business operations.
• Invest in nature-positive projects: Channel investments towards projects that conserve and restore nature.
• Educate and raise awareness: Increase awareness among stakeholders about the benefits of investing in nature and its impact on reducing insurance risks.
• Reporting and disclosure: Improve transparency with consistent reporting on nature-related impacts and efforts.

Why is nature important for the insurance sector?

Nature’s health is directly linked to the stability and viability of the insurance industry. The decline in natural capital due to activities such as mining and urban development exposes insurers to increased risks, highlighting the need for strategic adjustments that incorporate ecological considerations into risk assessments and policy formulations.

Recent policy and regulation developments

Regulatory frameworks are evolving to recognise and protect natural assets more robustly. With the adoption of the Global Biodiversity Framework and enhancements in sustainability reporting, Australian insurers need to stay ahead of compliance curves and integrate these new requirements into their strategic planning.

The shift to resilient and nature-positive insurance

The movement towards nature-positive insurance is accelerating, necessitating a shift from traditional risk management to models that incorporate ecological impacts and benefits. Insurers must explore and invest in products and strategies that promote environmental restoration and conservation as integral elements of their business practices.

Nature opportunities for Australian insurers

Opportunities for insurers include developing innovative financial products that fund and insure nature restoration projects. For example, parametric insurance, which triggers payouts based on specific environmental metrics, can provide quick disaster recovery funds, reducing overall costs and supporting community resilience.

Conclusion

Embracing nature-positive insurance practices is not only a strategic necessity for risk management but also a moral and environmental imperative. By aligning their operations with global sustainability goals, Australian insurers can lead in mitigating the adverse effects of climate change and nature loss, ultimately securing a resilient future for the industry and society.