The next 10 years are a “critical window” for the insurance industry to play its part in mitigating nature-related risks, Insurance Council of Australia (ICA) CEO Andrew Hall says.

Mr Hall made the comments in a new Valuing Nature for a Resilient Future report outlining what insurers can do, and detailing emerging insurance solutions that help protect from climate impacts.

Environmental degradation can make assets less resilient to severe weather events, hurting underwriting and investment returns and putting upward pressure on claims and premiums. 

Extreme weather and biodiversity loss are two of the top four global risks over the next decade, the World Economic Forum says.

Insurers can help with products that protect assets like coral reefs and coastal defences, investment in wetland restoration and reforestation to reduce the impact of flooding, landslides and other disasters, and with influencing politicians.

"Insurers have a critical role to play in protecting nature and in turn protecting their customers,” Mr Hall said. “Underwriting and investing in nature can play a key role in building resilience to climate change.

“Where initiatives like these serve to reduce risk, they also serve to better protect communities and ultimately moderate rising pressure on insurance premiums.”

Pollution and poor land-use planning decisions are contributing to biodiversity loss, which has "compounding economic and societal impacts,” the report says, with more than half of the world’s economic output dependent on nature.

Without management, unabated nature-related loss will impact operations, supply chains, and markets, the report says.

General insurers provide Australian businesses and households with 41 million policies each year and pay more than $188 million in claims a day. The report says insurers can support wider government resilience initiatives through underwriting coastal restoration, and can drive capital towards investments that generate resilient outcomes, “from sustainable forest management to mangrove restoration”.

Bushfires, floods, droughts, heatwaves and storms are key climate- and nature-related risks to Australia which are “compounding through supply chains and services across insurer’s underwriting portfolios”.

It is estimated that almost $US354 billion ($550 billion) insured assets had climate-related losses globally between 2017–2020, the report says.

"There are also significant opportunities for insurers to promote restoration, protection and enhancement nature through asset protection, liability reduction and facilitation of capital inflow from financial markets. Insurers can also directly invest and channel capital towards nature-positive outcomes.”

The Taskforce on Nature-related Financial Disclosures (TNFD) will provide a global framework for business and finance to disclose and address nature-related risks and opportunities, and the report is intended to help the insurance sector prepare.

"Market frameworks that incentivise underwriting and investment in nature-based and resilient outcomes … will provide greater opportunities for insurers to support a nature-positive future,” the report said.