Former U.S. Vice President Al Gore recognized the insurance industry’s key role in helping the world to tackle climate-related risks during a speech at The Geneva Association’s annual General Assembly last week.
“Now that our world is facing the gravest risks it has ever faced, the world should turn to insurers for advice,” Gore said in his address. “In turn, insurers must be more vocal about the challenges they see.”
Sixty-six insurance industry chief executives demonstrated they were on the same page as they finalized a “Climate Risk Statement” clarifying the industry’s climate change initiatives at the Toronto meeting on Friday.
“The insurance industry has long ago taken the initiative on climate risk, and with this statement commits to do even more,” Gore said. As an industry it has the capacity to work with policymakers on the mitigation of climate-related risks. If market forces are leveraged and elected officials and regulators are engaged wisely, insurers have so much to offer and can help the world deal with this serious issue.”
“Most people don’t want to think about long-term risk,” he said.
Michael Butt, co-chair of The Geneva Associations Climate Risk and Extreme Events working group and Chairman of AXIS Capital, expressed a similar view in a video interview from the meeting posted on the Geneva Association website.
“Many of the issues related to extreme risks can become political,” and when they do, “they become short-term,” he said, contrasting a relatively short-term political process with the long-term thinking of the insurance industry.
“We have accurate information over pricing of risk. So we can put out messages as to what the real risk of doing something is,” Butt said on the video, using rebuilding on a flood plan on building on an earthquake fault as just two examples of areas where insurers can send risk-based price signals.
Insurers can offer “real experience” and lessons in mitigation and adaptation.
“We have experience if people want to listen, which they should because we can then make the whole economic process a lot better.”
Butt added: “We now have statistics to show that it is infinitely cheaper to take preventative measures than it is to post-event fund—for governments and the [insurance] industry.”
Among the key points are:
- For customers: “We are willing to design insurance products to support low-carbon energy development projects and to help attract investments to such projects.
- For policymakers: “We recognize the significant benefit of pooling climate risks. We urge policymakers to collect robust data and make it freely available to allow risk assessment and to facilitate efficient solutions where premiums are risk-based.”
- For United Nations: “Insurers have the expertise to develop a broad range of affordable private insurance solutions for climate risks.”
- For Insurance Industry: We encourage political processes to work towards a better understanding of the potential costs of climate change and the advantages of market-based solutions.
The complete statement of guiding principles in all four areas is available here.
Shuzo Sumi, Chairman of Tokio Marine and co-chair of the Climate Risk and Extreme Events working group also signed the statement. “Insurance is a vital tool in the development and sustainability of both emerging and developed economies. It promotes stability in the global economy for individuals, institutions and governments by taking on risks and dispersing them around the world through the global reinsurance markets,” he said in a media statement about Gore’s remarks and the commitment of the members of The Geneva Association.” In the face of increasing economic costs caused by climate-related disasters, it is vital that the full potential of insurance and reinsurance is harnessed effectively,” he said.
About the Geneva Association
The Geneva Association is an international insurance think tank for strategically important insurance and risk management issues. Through the development of research programs, regular publications and the organization of international meetings, The Geneva Association serves as a catalyst for progress in the understanding of risk and insurance matters and acts as an information creator and disseminator.
The Geneva Association membership comprises a statutory maximum of 90 chief executive officers (CEOs) from the world’s top insurance and reinsurance companies.
The association is based in Geneva, Switzerland and is a non-profit organization funded by its members.
Source: The Geneva Association