The insurance sector plays a critical role in the transition to a low-carbon, resilient and sustainable global economy, both in terms of the risks it covers and the investments it makes.
As a risk manager and risk carrier, the insurance industry provides leadership in risk modelling and can help to signal emerging risks by pricing them. The world is facing increasing environmental, social and governance (ESG) challenges that are influencing traditional risk factors and impacting on the industry’s viability. A resilient insurance industry depends on comprehensive risk management in which ESG issues are integrated. A number of global efforts are emerging to support this effort. The UNEP Principles for Sustainable Insurance, for instance, provide a holistic approach to managing a wide range of global and emerging risks in the insurance business, including climate change and natural disasters.
Climate change is now recognized as an existential threat to the sector, with the potential for an uninsurable world if global warming continues unabated. In response, some insurance companies are committed to induce positive change and to support emission reduction efforts by providing a wider range of risk-transfer and through stewardship of their equity assets.
In addition to its influence on climate adaptation and mitigation, the insurance sector can also contribute to the 2030 Agenda for Sustainable Development through inclusive insurance, which develops appropriate insurance products for low-income populations.