×

Our award-winning reporting has moved

Context provides news and analysis on three of the world’s most critical issues:

climate change, the impact of technology on society, and inclusive economies.

Insurers should consider climate risk more: industry group

by Reuters
Wednesday, 7 December 2016 15:50 GMT

Waves hit the city's waterfront during a storm in Montevideo, Uruguay, Oct. 27, 2016. REUTERS/Andres Stapff

Image Caption and Rights Information

Losses from natural catastrophes have increased five-fold since the 1980s to around $170 billion today

LONDON, Dec 7 (Reuters) - Insurers should pay more heed to climate risk in their investment strategies to plug an annual $100 billion "protection gap" of uninsured losses from natural catastrophes, a network of 29 global insurance players said in a report on Wednesday.

The report by the network ClimateWise, which includes the Lloyd's of London insurance market, Swiss Re and broker Aon Group, said introducing a rating system to measure financial assets' resilience to climate change could help protect insurers' investment arms from losses from weather-related catastrophes.

Analysis by ClimateWise member Swiss Re found losses from natural catastrophes such as windstorms and floods have increased five-fold since the 1980s to around $170 billion today, with the average annual protection gap - the gap between insured and uninsured losses - widening from $23 billion to $100 billion.

The recommendation by the industry group comes two weeks after nearly 200 nations agreed over talks in Morocco to work out the rules of the landmark 2015 Paris agreement to tackle climate change.

"Industry leaders now have the opportunity to step up to the challenge outlined by the Paris climate agreement," Tom Herbstein, programme manager of ClimateWise said.

"In particular, the industry must help shift capital flows into climate-resilient assets and resilience-enhancing investments rather than simply struggling to maintain its current underwriting exposure."

Recommendations also include encouraging private investment in infrastructure projects, support for green bonds issued to finance environmentally-friendly projects, and support for resilience impact bonds.

Resilience impact bonds - a hybrid of social impact and green bonds - allow investors to fund environmental projects such as forest restoration to protect against risks such as forest fires.

ClimateWise was established in 2008 by the Cambridge Institute for Sustainability Leadership.

(Reporting by Ritvik Carvalho; editing by Carolyn Cohn and Alexandra Hudson)

Our Standards: The Thomson Reuters Trust Principles.

-->