Insurance industry can help cities on climate risks, according to new report

The insurance industry can play a key role in advising cities on how to assess climate risks and supporting them in the development of resilience plans, according to a study released by the AXA Group, an insurance and asset management multinational, in collaboration with the United Nations Environment Programme Finance Initiative’s Principles for Sustainable Insurance (UNEP FI PSI).

“This report shows that certain cities have made great strides to become climate-resilient, but much remains to be done,” said Henri de Castries, Chairman and CEO of AXA Group, during the launch at AXA’s headquarters in Paris. “We hope the findings will provide useful insights for public authorities and businesses alike to better plan for the consequences of global warming. It is our conviction that, thanks to its expertise in risk modelling and prevention, crisis management and better repair, the insurance industry will become a decisive partner in this global effort to develop resilience to climate change.”

The report, entitled BUSINESS UNUSUAL: Why is the climate changing the rules for our cities and SMEs, highlights how cities and SMEs are working to become more resilient to the effects of climate change. Some 1,100 small and medium-sized enterprise directors and urban leaders from major cities in 18 countries across Europe, the Americas and Asia, took part in the research, carried out by the Penn Schoen Berland (PSB) Institute, to discover the challenges and obstacles that are slowing down resilience efforts.

The research showed that 62 percent of SMEs believe that insurance companies are a credible source of information on climate change, while urban leaders also recognise the power of the insurance industry to drive change, and the importance of having an ongoing dialogue with insurers to better understand the evolving nature of the risks they face.

“This report could not have come at a better time,” said Butch Bacani, Programme Leader of the UNEP FI PSI. “Our vision is a risk aware world, where the insurance industry is trusted and plays it’s full role in enabling a healthy, safe, resilient and sustainable society. Risk management and collaboration are at the heart of sustainable development.”

The insurance industry also has the opportunity to instigate behavioural change among businesses at the local level through education and awareness, as well as through the pricing and design of products but also services that incentivise resilience measures. Overall, 74 percent of SMEs believe that insurance companies can help reduce climate-related risks.