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Nature’s Premium: The Insurance Industry and Climate Risk

by

Kathy Baughman McLeod

Director of Climate Risk & Resilience

October 2015

Elkhorn coral outplanting by The Nature Conservancy in Dry Tortugas National Park, Florida. Photo © Carlton Ward/TNC
Elkhorn coral outplanting by The Nature Conservancy in Dry Tortugas National Park, Florida. Photo © Carlton Ward/TNC

Earlier this week, I was featured in Business Insurance exploring the question: Can the insurance industry help finance nature-based resilience for communities? The answer, I said, is yes, especially in the face of a changing climate.

I believe that the insurance industry can play a key role today in helping society innovate new solutions to reduce climate risks and make people safer.

And it won’t be the first time the sector has affected social change. In the 19th and early 20th centuries, insurers incentivized smoke detectors and fire escapes in the face of then all-to-common urban fires. And more recently the industry supported the movement toward mandatory seatbelts in cars.

Climate risk—and increasingly severe disasters—is one of this century’s biggest challenges. At The Nature Conservancy, we know the role healthy natural systems play in reducing this risk to communities—and in reducing costs.

Our scientists, led my Dr. Mike Beck, have demonstrated the effectiveness of natural systems, such as a healthy coral reef, which can absorb up to 97 percent of a wave’s energy before it hits the shore—on par with more expensive built infrastructure like seawalls, and with the added benefits of also promoting healthy fish populations, recreation opportunities and local economies.

Leading insurers are taking notice of this, too, and taking account of nature’s role in their risk modeling. Swiss Re, a partner of the Conservancy, is one of companies leading the way. Alex Kaplan, Swiss Re’s Vice President of Global Partnerships, recognizes the value of natural infrastructure because it is “about allowing economic progress to continue.”

And earlier this month, the head of Swiss Re made a powerful statement urging climate action and highlighting the role that his industry can play.

By putting a value on nature, insurance is seeing potential opportunities to lower premiums and save money on payouts should a disaster occur.

As we expect the trend of increasingly severe climate-related disasters to continue the insurance industry has a unique opportunity to help maximize nature’s role in meeting these risks—and showing the world that nature’s premium is worth it.


Originally Posted on Conservancy Talk

October 01, 2015