The Insurer TV panel calls for sustainable approach to climate risk

The (re)insurance industry’s approach to climate change needs to be sustainable to succeed, industry leaders have warned.

Speakers from Guy Carpenter, Swiss Re and Conduit Re said strides taken towards net zero and a greener world need to be backed by market discipline and strong underwriting standards if they are to work in the long run.

This was the key message from a climate risk panel discussion held by The Insurer TV on the first day of the Monte Carlo Rendez-Vous, in our pop-up studio suite in the Hôtel de Paris.

“There needs to be discipline in the marketplace, which is where a crowded marketplace can be counterproductive,” said Mike Mitchell, head of property and specialty underwriting at Swiss Re.

Mitchell urged “strong technical leadership” in risk assessment and maintaining risk management standards, in order for the industry’s efforts to not be in vain.

“Everyone wants to lean into protecting green assets, but if that develops into a market that is unsustainable, then I think we’re actually delaying progress that we can make as an industry,” he said.

In May this year, Swiss Re was named as one of five founding buyers of credits from a scheme set up by climate solutions provider South Pole aimed at driving down the cost of taking carbon dioxide out of the atmosphere.

Climate risk is of “paramount consideration” in discussions between broking clients and reinsurers, underlined David Priebe, chairman at Guy Carpenter.

Priebe also spoke about the need for shorter-term goals, amid the medium- to long-term net-zero efforts.

“Targets are realistic, but we also need interim steps to ensure that we’re making progress towards them. 2050 might seem a long way to wait, but it’s really here sooner than we realise,” he said.

Reinsurance is at the forefront of insurance industry initiatives, he stressed, but “the industry can also only move as fast as the entire system”.

“There needs to be continued momentum on the governmental front to sort of set forth consistent standards of how we’re going to measure climate change. In all those aspects, I think the industry is ready.”

Conduit Re executive chairman Neil Eckert was upbeat about the insurance industry’s efforts.

“Every single insurer is walking the walk,” he said. “The capacity is out there. I don’t think there’s a shortage of capacity for insuring renewable assets at the moment. I think that’s even quite a crowded marketplace.”

He stressed the value of bringing along carbon-intensive insureds, as insuring their green transition would be even more important than insuring renewable energy or green technology.

“What we don’t want to see is ostracising clients and customers,” said Eckert. “The people that can have the most impact are the current energy-intensive businesses that can be transitioned.”

Rather than insuring a new wind farm that is already net zero – commendable though that is – it is the traditional big energy companies that represent “some of the most responsible custodians of assets in the industry”, he noted.

“They’re the people we have to work with to try and find the solution into the sustainable economy,” said Eckert.

As part of that transition, Eckert pointed to the importance of insuring the decommissioning of dirty energy assets.

“When you decommission assets, you leave huge liabilities in the ground, which will be really fascinating. Also how the market approaches capture and storage. There are potentially some really big environmental issues on capture and storage and insurance that will be just as fascinating,” he said.

Eckert also referred to the ClimateWise initiative launched in 2007.

The industry is gathering in Monte Carlo for the Rendez-Vous in the wake of the passing of Queen Elizabeth II and succession of King Charles III. On the subject of climate change, it’s worth reflecting on the role Charles has played in the insurance marketplace, such as his backing for the industry’s ClimateWise initiative.

Run through the University of Cambridge Institute for Sustainability Leadership, the initiative requires members to report annually on actions taken against seven principles aligned with the Task Force on Climate-Related Financial Disclosures. Fidelis was the latest carrier to join in August 2021, bringing the number of ClimateWise members up to 41.

Watch industry leaders discuss the industry’s role in combating climate change, filmed on the balcony of The Insurer TV’s pop-up studio suite in the Hôtel de Paris, for the Monte Carlo Rendez-Vous. View for more about: