Insurance: responding to climate impacts and rewarding resilience

A Sustainable Finance work theme

Flooding in Houston, Texas in the aftermath of Hurricane Harvey (Credit: Karl Spencer/istock)

This work is examining how the different economic and financial roles of insurance can be used and adapted to support the low-carbon transition and the people affected by climate change.

Work focuses include:

  • How insurance can be an instrument to support climate resilience and adaptation.
  • How the relationship between insurers and other parts of the financial system can support climate resilience.
  • How insurers’ knowledge and risk analysis tools on climate change impacts inform others on their exposure to physical climate risks and how to manage those risks.
  • How insurers can use insurance policies and investment portfolios to support and expedite climate change mitigation and adaptation.

Why is this work important?

Climate change presents huge challenges for insurers as they are directly exposed to climate damages through their insurance commitments. Climate volatility and associated phenomena such as forest fires have recently pushed insurance companies into losses, for example in California in 2017 and 2018.

Insurance can play a vital role in supporting the individuals and communities that are most vulnerable to the impacts of climate change. Well-designed policies can be hugely helpful for increasing communities’ resilience, for example if support payments are triggered by climate phenomena that challenge livelihoods.

Insurers also control large investment portfolios. Where they direct this finance has important implications for the transition. They can have profound impacts through the decisions they make on which assets to insure or on what terms.

Projects

Publications

Insurance as a catalyst for using climate risk information for government planning and decision-making: A framework for analysing drivers and barriers, tested against evidence  emerging from Sub-Saharan Africa October 2019

Disaster insurance in developing Asia: An analysis of market-based schemes October 2019

Flood Insurance and Flood Risk Reduction September 2018

Strengthening insurance partnerships in the face of climate change – Insights from an agent-based model of flood insurance in the UK  April 2018

Promoting flood risk reduction: The role of insurance in Germany and England October 2017

Fit for the future – The reform of flood insurance in Ireland: resolving the data controversy and supporting climate change adaptation May 2017

Ambiguity and Insurance: Capital Requirements and Premiums May 2017

Commentaries

Insurers disclosing climate risk need to remember their customers August 2019

Insurance and climate risk: the critical role of regulators November 2018

Where next for sustainable insurance? Five priorities for the next decade November 2018

Webinars

ShareAction webinar on insurance and climate change

This webinar looks into some of the key findings from ShareAction/AODP’s latest practical guide: Insuring a low-carbon future, and will explore a range of initiatives proactive insurers are taking to integrate climate-related risks and opportunities across their underwriting, investment and group-wide risk management practices. ShareAction’s Peter Uhlenbruch, the author of the guide, is  joined by insurance and climate expert, Dr Swenja Surminski from the LSE’s Grantham Research Institute, to share her views.