UN: insurance industry must play role in shaping more sustainable future

As a major source of long-term investment the insurance industry must play a “strong role” in shaping a more sustainable future, according to UN secretary general Ban Ki-moon.

The comments were made to the International Insurance Society Global Insurance Forum in New York and come ahead of world leaders meeting in December in Paris to discuss a universal climate treaty.

Ban argued that the world now has a “historic opportunity” to get on track for long-term, low-carbon, climate-resilient growth and urged the insurance sector to be part of that development.

Ban said, “The insurance sector is well-placed to be a leader in risk sensitive investments. As a major source of investment, much of it long-term, the insurance sector can and must play a strong role in shaping a more sustainable future.”

He added, “Disaster risk reduction is a front-line defence against the impact of climate change. It is a smart, cost-effective and life-saving investment. It is time for global action on resilience and disaster risk reduction that not only anticipates and absorbs climate risks, but also reshapes them into an opportunity for safer sustainable development.”

The UN chief noted that the insurance industry is aware of the “tragic human toll” and “staggering economic price tag” linked to the impacts of climate change, such as the rise in extreme weather events.

The Bank of England has previously raised climate change concerns with insurers and Lloyd’s of London urged the industry to take a longer-term view of potential impacts to avoid rising financial losses.

At the New York summit, a research team from Cambridge University argued that policymakers now have a “once in a generation” opportunity to reform the insurance sector to better protect those at risk of climate change.

Speaking to the BBC, Ana Gonzalez Peleaz, a fellow from the Cambridge Institute for Sustainability Leadership, said, “My role was to highlight the policy implications of having insurance at the centre of requirements to protect exposed populations. The lack of effective insurance regulation is a problem for accessing insurance across all parts of society.”

The study brief, which was outlined at the summit, noted that 4.4 billion people have been affected by natural disasters in some way, with 1.3 million losing their lives, in the last two decades alone.

The brief continued, “Both developed and developing countries are affected by natural hazards and associated disasters, of which 70-80% are driven by climate related risks.”

Photo: Shaun Dunphy via Flickr

Further reading:

US insurance companies not prepared for climate change, Ceres finds

Insurance, reinsurance and climate-related risk management

Stranded assets and climate change on Bank of England agenda

Report: majority of large investors failing to manage climate risks

‘Battle brewing’ between energy and insurance industries over climate change