Winds of change

Philippe Maso, chief executive, AXA UK

Climate change is a powerful incremental driver that will influence future insurance models and pricing. It is a significant contributor to risks and revenues in our industry, and a government and regulator issue that is growing in importance as we see increasing examples of its effects. The recent floods in Cockermouth are a visible example of what we can expect more of in the future. We must be prepared.

Our industry has a vital role to play in raising awareness and educating the public about the risks and, more importantly, in how society must change to mitigate the longer-term effects, such as building in flood risk areas or reducing energy consumption.

We must invest in infrastructure that helps us to prevent and adapt to climate change. We also need tax incentives to promote a low-carbon economy, the regulation of carbon markets and public guarantees to support insurance pools.

We must also work together on targets for greenhouse gas emissions. 

Mandatory risk reduction plans would definitely help our industry to manage the large-scale, regional impacts of climate change – for example, a firm action plan to limit emissions. And a robust global carbon trading market would help us all to identify a clear carbon price, while a comprehensive package on technology co-operation, as well as the funding required to accelerate the development of a low carbon economy, would help guide insurers on the product solutions we need to provide.

AXA has signed both the Corporate Leader and ClimateWise Copenhagen communiques. I hope now that the summit can deliver an agreement of the scale and structure to properly support mitigation and adaptation measures, and provide a clear framework for future progress.

Simon Lee, chief executive, international businesses, RSA

When world leaders meet in Copenhagen to discuss climate change, we need to be very conscious of the impact that their talks will have on the insurance industry.

Insurance is all about helping customers to manage risk. The industry can help them to understand the level of risk they face and underwrite that risk to give security, but it also can respond when the worst happens. We touch every part of the economy, helping customers prevent losses and get their lives back on track.

Climate change poses many risks to the planet and our industry, and we have a vital role to play in helping the transition to a low-carbon global economy. This presents insurers with opportunities and the summit provides an excellent platform for these.

The diminishing influence of the Arctic in mitigating the effects of climate change is cause for concern. More severe or frequent weather conditions hit our customers and affect our business. We’ve seen this in stark terms in recent years with the devastating impact of flooding and windstorm damage in the UK, Canada and elsewhere. This directly affects us but, crucially, it also affects our customers. We cannot and should not duck the issue.

Behaving responsibly and ethically in managing our businesses directly influences the environment, the people and the communities in which we operate.

Our approach must be practical and focused on the main business impacts, delivering commercial benefits while recognising the value we add to society. Sustainability will be key to the future success of business. A business that can manage this well shows it is a well-managed business.

Professor Peter Höppe, head of geo risks research, Munich Re

It is typical of important negotiations that results are only announced after long nights of hard bargaining. Only after all the stops have been pulled out, with talks on the brink of failure, is a breakthrough made. That is my hope for the summit in Copenhagen.

Very little has emerged so far apart from political statements. In July, for the first time, the heads of the G8 states, plus China and India, backed the goal of limiting the rise in temperature to 2°C above pre-industrial levels. This implies that by 2050 carbon dioxide emissions will have to fall 50% globally and 80% in the industrialised countries, or the target cannot be met.

But what are the commitments of individual countries? The EU has led the way by announcing a cut of up to 30% by 2020, and the US has said it will identify emission reductions at Copenhagen.

At the very least we need a framework agreement in Copenhagen as climate change may become very costly. Expense in the long term would far exceed the costs incurred in taking measures now to keep it manageable.

Hence an appeal to the negotiators: please agree, and quickly. As the negative effects of climate change can no longer be prevented, particularly in developing countries, solutions must be found, financed by industrial nations through emissions trading as a form of “polluter compensation”. The Munich Climate Insurance Initiative, supported by Munich Re, has made proposals along these lines.

We will all benefit from climate protection – from lower losses due to natural catastrophes and from the economic potential of technologies that contribute to climate-neutral energy production.

If we fail to take measures now, the generations to come will have to pay the price.

Andrew Torrance, chief executive, Allianz, and chairman, ClimateWise

As our political leaders take their seats in Copenhagen, their goal is to deliver a global deal on climate change that will arrest the rise in average temperatures at a maximum of 2°C.

ClimateWise, the collaboration of leading insurers, fully supports this aim. We believe that the climate crisis poses a systemic risk to the global economy.

Developed countries should agree to a 2020 emissions reduction target of 40% over 1990 levels, and for major developing countries to agree to a substantial reduction relative to business as usual. This is the boldest set of targets backed by any industry group and reflects our professional duties as managers of risk. There will be devastating consequences if we do not seek the best chances of success in reducing the impact of climate change.

Eighty-six per cent of ClimateWise members (56% last year) have disclosed their greenhouse gas emissions. However, not all of them have begun to use this data to develop targets on how to reduce emissions – a challenge for 2010.

Policymakers are facing enormous pressures from powerful industries that lobby governments hard in an attempt to limit the impact a global deal could have on the levels of carbon they now send into our atmosphere.

There is a danger that summit delegates might find many of these justifications for maintaining the status quo attractive. But I believe the insurance industry, with its long-term and holistic view of the risks faced by governments, economies and societies, is now speaking convincingly with one voice to demand an ambitious pathway towards the required emissions reduction. This journey must not be delayed. IT