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Insurance role in mitigating climate change

The insurance industry has a key role to play in helping businesses and individuals to ‘build back better’ from extreme climate events to mitigate the impact of climate change. The aftermath of the Covid-19 pandemic provides an opportunity for business and society to build resilience in the inevitable face of the climate change.

These were some of the conclusions of a panel of climate change academics and others at a virtual discussion hosted by Resilience First, including Baroness Brown of Cambridge, Chair of the Adaptation Committee on the UK Committee on Climate Change.

The panel also concluded that business should be preparing for the impact of 2 degrees C of global warming, and the extreme weather and rising seas that entails, as a normal planning assumption; rather than merely as a possible risk, to include on a risk register.

Julia Elizabeth King, Baroness Brown of Cambridge, said: “I would like to see a change in the language of what constitutes a risk; 2 degrees C of warming is not an item for your risk register, it is almost a certainty. Good planning is planning for 2 degrees C of global warming, the possibility of 4oC of warming should go on your risk register. In the UK by 2050, in a low-adaptation scenario, the amount of flood damage could still double from current levels.

“The insurance industry has a very important role to play. Flood Re is now enabling people to build back better where previously their insurers only funded like-for-like replacement of property damage. Now businesses and individuals will be able to build in flood resilience measures with insurance funding. This is a very important development.”

Robert Hall, Executive Director of Resilience First, the business membership group, said: “We all need to change and adapt to this slow-burn issue which has been compared to that story of the boiling frog. Companies everywhere urgently need to step up their action against climate change, so we are doing our bit.

“Our focus is on business adaptation and the role that the insurance market can play in driving behavioural change and encouraging citizens, corporations and communities alike to be more resilient to the inevitable changes from a warming planet.

“The aftermath of Covid-19 is an opportunity for the green lobby to have an impact in terms of influencing where we invest in not only in new skills but also new technology that will promote sustainable behaviour.”

Chris Rapley CBE, Professor of Climate Science at University College London (UCL) chaired the webinar. He said: “Covid-19 has provided us with the evidence of what can happen if we don’t prepare properly. It has educated us about the interconnectedness of global events and trends. It has also shown us that society can flex and change its behaviour much more radically that we ever thought possible.

“We are now seeing the harsh realities of climate change all around us. In spite of good work by many governments, individuals and businesses, there is much evidence that the state of readiness for climate change is currently still poor. The new normal for climate change is now not 1oC degree of warming, but 2oC and could even rise to 4 degrees C.”

Professor Jason Lowe, Principal Fellow and Head of Climate Services at the Met Office, spoke first. He said: “The UK has experienced changes in mean climate and climate extremes, with the temperature of the hottest day of the year increasing by 0.8 degrees C or more and the precipitation on extreme wet days by 17 per cent when comparing a recent decade with the period 1961 to 1990. These extremes come with a range of impacts on health, property and infrastructure, and the changes are projected to continue into the future.

“One of the most exciting recent developments in climate science has brought together an understanding of both the hazard and the vulnerability in order to be able to articulate better the risk of particular impacts. There is a still a challenge to bring together shorter-term forecasts and long-term climate change projections in risk-based planning decisions.”

Philip Songhurst-Thonet, Senior Director at the consultancy Control Risks, said: “We are now awash with data, but even with all of this data it is very difficult to forecast precisely what is going to happen many years into the future. But the insurance sector needs certainty in order to underwrite and price risks.

“The insurance industry still needs to remain profitable and will not underwrite risks it does not fully understand. The Covid-19 pandemic has been a rising-tide crisis. Climate change is the same and now is a great opportunity to emerge greener and more resilient than ever before.

“The insurance industry needs to have in place a proper system of benefits to incentivise climate resilient behaviour and disbenefits to discourage behaviour that does not mitigate for the impact of climate change. But insurance companies cannot do this on their own; there needs to be, first, a cross-industry approach and, secondly, assistance from government.”

Next event

Resilience First has researched with the management consultancy McKinsey how companies can build on practices used to weather the Covid-19 crisis, and embed them in normal operations. McKinsey staffers and Alan Brown, Group Security Director, Tesco; Hank Cole, Global Head of Business Continuity and Incident Management, HSBC;
Brian Stratton, Head of Distribution Capital Delivery, UK Power Networks are speaking at the next Resilience First webinar, on ‘Agile resilience‘, on Wednesday afternoon, October 7, from 3pm.

(Photo by Mark Rowe; beach near Hayle, Cornwall, August dawn)


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