The warning signs are stark, the predictions dire. Climate change isn’t a distant threat; it’s here, it’s affecting us now, and it’s amplifying at an alarming rate. Reports from esteemed bodies like the Institute and Faculty of Actuaries and the Intergovernmental Panel on Climate Change (IPCC) paint a haunting picture of a future where even a 1.5 °C rise in global temperatures poses an existential risk. The repercussions? Catastrophic.

The impact on insurers

Mutual/cooperative insurers, guardians of financial security in an uncertain world, are not immune to this tumultuous shift. As climate change fuels a rise in natural disasters, traditional insurance claims are spiralling. The domino effect is palpable: increasing claims lead to rising premiums, rendering insurance unaffordable for many. Regions once deemed insurable are now facing uncertainty – Florida and California (USA) bear testament to this alarming trend, and that’s just the developed world.

A tumultuous future

If left unchecked, this trajectory spells doom for insurers. The widening protection gap, the chasm between risks and insurance coverage, continues to worsen, leaving both insurers and the insured vulnerable. The very essence of insurance, to provide security, falters as climate-induced disasters surge.

Resilience: the way forward

My call to action for insurers is to adopt a resilience strategy. This is no longer just an option; it’s a mandate. Embracing a resilience strategy isn’t merely a choice; it’s survival and adopting such a strategy entails a holistic approach encompassing prevention, adaptation and mitigation.

The path to resilience

But how do insurers transition into this new paradigm? The answer lies in aligning business frameworks with global agreements. The Sendai Framework for Disaster Risk Reduction, the Paris Climate Agreement, and the UN Sustainable Development Goals (SDGs), signed by all UN Nation States in 2015, provide the blueprint for responsible, resilient and sustainable business practices. Practices that all the business world now needs to adopt in order to survive.

Action points:

1. Net- zero commitments: Insurers must commit to net-zero emissions across investments, underwriting, operations, and stakeholder engagement, forging a just transition roadmap from 2023 to 2050.
2. Quantifiable strategies: Break down resilience strategies into quantifiable, measurable actions that align with global benchmarks like the ICMIF UNDRR Resiliency Benchmark, the ICMIF-calibrated Insurance SDG Calculator, both of which embed the three global frameworks from 2015 and hopefully will be incorporated in metrics and influences from key bodies like the Global Reporting Initiative (GRI) and the International Sustainability Standards Board (ISSB).
3. Underwriting and investments: Integrate sustainability metrics into underwriting processes, through the ICMIF-calibrated Insurance SDG Calculator, and leverage investment opportunities in resilient infrastructure markets, green bonds, and climate initiatives worth trillions.
4. Sustainability reporting: Adopt standardised sustainability reporting, using benchmarks like the GRI and harmonise reporting practices via the ISSB and regulatory initiatives such as European Financial Reporting Advisory Group (EFRAG) and Corporate Sustainability Reporting Directive (CSRD).

The call to action

The momentum within the financial services sector is shifting. Insurers must seize this moment, driving proactive measures against climate change. Mutual insurers, many of which are leading the charge, must transform rhetoric into action. The tools are at our disposal, and trust is vested in us. It’s time to move swiftly and decisively and show true leadership.

Conclusion

Climate change isn’t a distant spectre; it’s a current crisis demanding immediate, collective action. Insurers, particularly mutual/cooperative insurers, have a pivotal role in fortifying societal resilience. The pathway is clear: embracing global agreements, quantifiable strategies, and sustainable practices. The choice is stark – act decisively and evolve or face the precipice of obsolescence. Rob Wesseling, ICMIF Chair and President & CEO of Canadian ICMIF member Co-operators and I will be attending the COP28 Climate Summit in December and we hope to be able to shift the momentum for the insurance sector by showcasing our action-orientated initiatives, through speeches and bilateral meetings.

As guardians of financial stability, mutual and cooperative insurers hold the key to navigating these turbulent waters. The time for talk is over; action is imperative. The opportunity to lead, innovate, and safeguard the future lies within our grasp – let’s embrace it wholeheartedly.