Insurers tackle climate risks

Companies should develop products and services in new areas related to climate change, including corporate liability and insurance for carbon markets and rain forests, industry group ClimateWise has warned.

The group held its second conference yesterday at Lloyd’s, the London insurance market. Peter Madden, chief executive of Forum for the Future, the independent sustainable development group that researched companies work in climate risks, said: “Insurance companies have a vital role to play in responding to climate change, by assessing the impacts it will have on our economy and pricing their products to accurately reflect the real risk it poses. ClimateWise members are playing a leading role, but they need to speed up their efforts to reflect the urgency of the problem.”

Allianz’s Andrew Torrance, Chairman of ClimateWise, said: “The ClimateWise Principles are intentionally holistic, and for many members the first step in this first year has been to embed them into their business strategies. They set challenging targets that will make a real difference in how members operate. The focus in the second year is on increasing delivery and extending influence of ClimateWise to boost the insurance industry’s work in tackling climate change.”

The aim of the first year review was to assess the compliance of the 41 members in implementing the six ClimateWise principles into their business operations.

Key findings from the review show that:

• The vast majority of members are taking the lead in risk analysis, through research into future risks posed by climate change, and are playing a key role in informing public policy making.
• Most members are finding ways of raising the awareness of customers in the issue, and encouraging environmentally friendly behaviour. Half have designed products or services to help customers reduce their carbon emissions.
• However, members need to do more to incorporate climate change into their investment strategies. Half currently do so.

The report recommends actions to speed up the pace of change necessary to tackle the problems posed by climate change. These are:

• Companies should factor into their business decisions the long-term risk to the economy caused by carbon-intensive industries.
• Companies should develop products and services in new areas related to climate change, including corporate liability and insurance for carbon markets and rain forests.
• Companies should make pension funds aware of the implications of climate change for company performance and shareholder value.

The ClimateWise conference was attended by more than 100 people from the financial services industry. Speakers include Joan Ruddock, MP, Parliamentary under secretary of state in the Department of Energy and Climate Change. The Prince of Wales, who launched ClimateWise in September 2007, said: “Over the next year I hope that new companies will join ClimateWise, and I look forward to help build this initiative into a truly global force for change. This is just the beginning of the process for real change, and I urge signatories to continue their endeavours to embed their response to climate change across their activities”