This report is for insurers on managing climate-related risks and opportunities’ and is based on interviews with 14 proactive insurers. It explores the measures being taken within the insurance industry to integrate climate awareness into underwriting, investment, and group-wide risk management practices, as well as identifying common barriers to doing so.

Introduction to climate change and the insurance industry

The report explains that the insurance industry is uniquely positioned to play a key role in managing the physical and transition risks associated with climate change. The industry can also seize new opportunities in a low-carbon economy. The United Nations Environment’s Principles for Sustainable Insurance (PSI) serves as an overarching framework for the industry to address environmental, social, and governance (ESG) risks and opportunities.

Surveying the leading practice landscape

The research indicates that insurers are using various methods to integrate climate change into their underwriting and investment practices. For instance, a number of insurers have established minimum ESG criteria for investments and have also created ESG investment strategies.

Exploring common barriers

This section of the report examines barriers to the adoption of sustainable practices in the insurance industry. The research highlights a lack of relevant data and understanding of climate risks by insurers. Furthermore, cultural indifference, stubbornness, and ineffective engagement with stakeholders are also identified as barriers.

Eight key building blocks for insurers at early stages

The report presents eight building blocks that insurers should consider when introducing and developing climate strategies. The building blocks are based on practical advice from interviewees and cover a range of issues from starting the journey now to challenging risk model providers and cross collaboration through working groups.

Recommendations for insurers’ investors

The research recommends insurers’ investors challenge them to develop more robust and holistic climate policies. It argues that investors must hold insurers accountable, provide support and guidance throughout the process, and assess the impact of their own businesses and investment on climate change.

Conclusion and wider recommendations

The report concludes that the climate crisis requires a more complete, ambitious, collaborative, and urgent response from the insurance industry. It argues that the development of climate strategies must become core business for insurers. The authors of this report provide recommendations for the industry, including a wider call for action by investors and regulators.

The authors argue that the insurance industry should fully integrate climate change into their entire risk management framework, underwriting criteria, and also their investment decision-making processes to manage the physical and transition risks associated with climate change. Insurers should develop new financial products and services that will help incentivise customers to transition to a low-carbon economy and mitigate any financial risks that arise from climate change. Finally, the report recommends that investors should play a larger role in the process by setting standards, promoting transparency, and helping insurers set science-based targets.