Industry cannot afford to waste climate influence

Insurers have been told they have the power to make a difference in the world’s fight to meet the challenge of climate change and it is a power that cannot be wasted.

Adam Winslow, Aviva CEO, UK & Ireland General Insurance, was speaking at the ABI Climate Summit yesterday and he sought to address the challenge for the industry ahead, and how the industry can set about tackling this challenge.

He said: “The damage, disruption and turmoil caused by climate change is affecting our planet, our communities and our customers.

“Insurers are not immune – February’s storms alone cost the industry £500 million, figures from the ABI show.

“As insurers, our role is to help ensure the transition to a low carbon future – by insuring it, investing in it, helping to direct it and accelerating its momentum.”

Winslow continued: “Planning is key: I’m proud that Aviva has targeted to be net zero by 2040. Our Climate Transition Plan outlines key milestones to net zero, such as exiting fossil fuel power generation in 2019 and subsequently growing our renewable energy underwriting portfolio by 150%.

“We believe the benefits of transition planning should be expanded to the whole economy, incorporating both private and public sectors.”

He revealed that the insurer along with the WWF, is calling for national policy and public spending to be aligned with a net zero future, and for climate plans to consider the interlinked question of protecting and enhancing nature and biodiversity.

“The aim is to protect against multiple climate events in a more sustainable way, while also improving biodiversity and providing wider benefits to communities,” Winslow continued. “Our Building Future Communities report expands on this, outlining seven key steps to protect UK properties and build stronger, more prepared communities for the future.

“How and where we build, and the materials we use, all need to be carefully reviewed so that construction has a minimal carbon footprint, and our homes and offices can withstand the extreme weather patterns that will be part of our future.”

He ended by saying the industry could not fail in grasping the opportunity to play a full role in the fight against climate change.

“We have the power to make a big difference,” he said. “Failing to use that influence is one risk we simply can’t afford to take.”

It came after insurers were warned by the Bank of England that the lessons for the recent Climate Biennial Exploratory Scenario exercise – or CBES, had to be learned.

Stefan Claus, the Bank’s technical head of its General Insurance Division said the process had thrown up a number of issues, which had tom be addressed by the market.

“The CBES was both deep – requiring a demanding level of modelling detail – and broad – including a wide-ranging questionnaire on risk management and business model responses,” he said. “It was always about more than just the numbers.

“That said, there is still much more to do to understand the exposures to climate risks.”

For was the lack of comprehensive and high quality data.

“There were two areas that insurers found challenging to obtain sufficient data: information on corporate emissions across value chains (also known as Scope 3 emissions) and geographical corporate asset location data,” he said. “Addressing data gaps for climate analysis is a priority if insurers are to deliver effective climate risk management, and to innovate and develop products to support the transition to a more climate-sustainable pathway.”

Second was the use of third party models.

“Nearly all firms were quite heavily reliant on third party models to complete their CBES submissions, explained Claus. “While that is not a problem in and of itself, some firms struggled to adapt these models to the specific CBES scenario, or to effectively understand and challenge the outputs of these models. This applies both to the asset models of life insurers, and to the catastrophe models of general insurers.”

He pledged regulators will play their part to support the industry’s efforts.

“The PRA will continue to work closely with industry, and with our international partners, to help accelerate the development of these capabilities and our collective understanding of the risks and opportunities from climate change and the transition to net-zero,” explained Claus. “At the same time, insurers will need to continue to develop more advanced capabilities to identify, measure and manage climate risks, including through incorporating climate risks in scenario analysis and investing in the development and scrutiny of models.”

“The aim is to protect against multiple climate events in a more sustainable way, while also improving biodiversity and providing wider benefits to communities, our Building Future Communities report expands on this, outlining seven key steps to protect UK properties and build stronger, more prepared communities for the future.”

Adam Winslow, Aviva

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