{"id":80866,"date":"2025-10-23T12:32:13","date_gmt":"2025-10-23T11:32:13","guid":{"rendered":"https:\/\/www.lse.ac.uk\/granthaminstitute\/?post_type=news&p=80866"},"modified":"2025-10-23T12:32:14","modified_gmt":"2025-10-23T11:32:14","slug":"embedding-equity-and-nature-into-insurance-schemes-that-tackle-climate-risk-reduction","status":"publish","type":"news","link":"https:\/\/www.lse.ac.uk\/granthaminstitute\/news\/embedding-equity-and-nature-into-insurance-schemes-that-tackle-climate-risk-reduction\/","title":{"rendered":"Embedding equity and nature into insurance schemes that tackle climate risk reduction"},"content":{"rendered":"\n

Climate change and biodiversity loss are no longer parallel issues but deeply interlinked crises. Together they heighten disaster risks, undermine ecosystem resilience and increase vulnerabilities for communities. Innovative insurance schemes, designed with equity, nature and climate risk reduction in mind, can play a key role in contributing to addressing the joint crises.<\/p>\n\n\n\n

Climbing atmospheric and ocean temperatures<\/path><\/svg><\/a> have led to an increased frequency of extreme temperatures, volatility in precipitation and natural catastrophes such as wildfires, floods, landslides and storms. This is causing widespread ecosystem degradation, infrastructure breakdown, financial losses and human mortality. In 2024, climate-driven natural catastrophes directly led to estimated losses of US$402 billion<\/path><\/svg><\/a> globally, of which only around US$151 billion had been covered by the insurance industry.<\/p>\n\n\n\n

The world also faces a nature crisis – connected to climate change – with 75% of the land surface now significantly altered and 25% of plants and animals threatened with extinction<\/path><\/svg><\/a>. Future cashflows depend on the resilience of ecosystems; an estimated US$10 trillion of GDP<\/path><\/svg><\/a> could be lost by 2050 due to the decline in ecosystem services if nature is not protected.<\/p>\n\n\n\n

Nature-based solutions (NbS), including wetlands, urban tree cover and coral reefs, are powerful tools that can address multiple challenges at once, including the need to restore ecosystems and mitigate and adapt to climate change. NbS are increasingly being discussed as a solution that, in combination with engineered assets or ‘grey’ infrastructure, provide resilience against climate change while also benefitting nature. There is a rising trend in NbS being embedded into the design of innovative insurance schemes, building long-term resilience in addition to providing a traditional risk-transfer mechanism.<\/p>\n\n\n\n

Insurance as a growing solution<\/h2>\n\n\n\n

Potential is growing for innovative insurance schemes to play a role in addressing the joint climate and nature crises. Insurance schemes have traditionally held a risk-transfer function, but over the last two decades there has been a growing focus on insurance addressing key drivers of risk, including nature-related aspects<\/path><\/svg><\/a>. Insurance is no longer being assessed solely on its ability to compensate after disasters but also on its contribution to building resilience before disasters occur.<\/p>\n\n\n\n

Our new report<\/path><\/svg><\/a> developed with partners from across the EU’s Naturance project<\/path><\/svg><\/a> highlights that insurance, when carefully designed, has the potential to support climate adaptation while also delivering co-benefits for people and nature. However, to succeed, schemes must be context-specific, financially viable and socially just. A key question remains regarding how these schemes should be designed to ensure they achieve their goals and avoid unintended consequences.<\/p>\n\n\n\n

Designing insurance to address climate, nature and<\/em> equity goals<\/h2>\n\n\n\n

Our assessment of case studies shows that innovative insurance schemes that address nature and equity as well as climate adaptation are not only possible to design but are already being implemented by forward-thinking insurers and their partners, creating clear benefits for society. Many of these schemes are in the early stages and there is a need for further evidence of long-term success to inform further schemes.<\/p>\n\n\n\n

The opportunities and challenges for policymakers, insurers and communities our study highlights include:<\/p>\n\n\n\n