Insurance Critical To Mobilising Climate Transition – Study

Over half of the £15trn already committed to financing the climate transition through to 2030 will require additional insurance coverage.

This is amongst the findings of joint research published by Howden and Boston Consulting Group on the role of insurance in mobilising the climate transition.

This acceleration in demand means that corporates should engage the insurance industry from an early stage in their climate risk management planning to secure adequate supply of capacity and long-term coverage, the report warns.

Insurance premiums for climate resilience and natural catastrophe protection are set to increase by 50% by 2030, reaching £158-£197bn as a result of increased annual losses caused by climate events, accelerated growth in exposures, climate risk disclosures and governments transferring risk to private markets.

To ensure access to insurance protection, the paper calls on clients to move away from an annual procurement exercise to a long-term view of risk, which in collaboration with insurers, could lead to multi-year coverage, public-private insurance solutions and forward-looking analytics as a basis for developing forward curves for risk.

Rowan Douglas, CEO of the Climate Risk and Resilience team at Howden, said: “Insurance is the financial bedrock needed to de-risk investments and attract the additional capital necessary to mobilise the climate transition. Astute companies are now elevating future insurability to boardroom level discussions because it will be essential to maintain access to capital. The key is developing long-term partnerships with insurers to build shared expertise and trust and optimise future access to scarce underwriting capacity. The alternative is an invitation to climate valuation risk.”

Lorenzo Fantini, managing director and partner at BCG, added: “Achieving net zero and climate resilience with adaptation strategies is an unprecedented challenge for all economies. Without sufficient insurance to de-risk markets, a smooth transition will be impossible. The insurance market must lead the de-risking dialogue to ensure the insurability and bankability of climate action.”