Insurance touches and is touched by much of human activity around the globe. So it should not be a surprise that insurers can be expected to be a bellwether for the economic impact of climate change.
Responses to climate change can be thought of in four categories:
Insurers will be a part of the market response to climate change as a normal course of business practices.
As climate-related changes start to impact human activities, some of those changes will immediately be worked into insurance rates. This will automatically start to discourage some activities and encourage others—generally, discouraging the activities that cause or that are highly affected by climate change.
Insurers have learned the hard way that being slow to incorporate new drivers of higher claims is not a good long-term strategy for their financial well being.
Markets Adapt to Drive Change
Insurers are also among the larger participants in investment markets. Together with pension plans, insurers are starting to include consideration of climate impact of companies in their criteria for selection of investments. This will eventually have an impact on the cost of funds, making it lower for businesses with a low adverse climate impact and for those unprepared for climate change effects on their environment.
Science Informs Adaptation
Insurers are already working to encourage the use of developing science solutions by their clients to achieve conservation and enhance resilience through underwriting and claims management processes.
Insurers Increasingly Conserve
Insurers, while managing their own businesses, are increasingly becoming consumers of the scientific solutions to climate change while they seek to consume less and improve their own resilience to climate changes.
Insurers Speak Out
Finally, insurers are also voices in the public forum, speaking out and encouraging the actions of governments to encourage the implementation of market, science, conservation and resilience based actions to prevent and prepare for the worst potential outcomes from climate change.