The insurance industry needs to get on the front foot and spread awareness of the necessity of action against climate change or risk a widespread market failure and insurance company insolvencies, according to a report by the UK Chartered Insurance Institute.

The report – entitled Climate Change and Energy Security: Global Challenges and the Implications – says the insurance industry is effectively “the meat in the sandwich” with climate change policy.

It says failure to adopt mitigating technologies will lead to the withdrawal of cover across the globe.

Under an “upside” scenario the world will adopt enough renewable energy to minimise global warming, governments will adopt sophisticated infrastructure and warning systems and insurers will take a lead role in providing economic incentives for climate change mitigation and positively influence public policy.

A “central” scenario sees limited and sporadic efforts to tackle global warming leading to isolated instances of insurance failure, with limited withdrawal of cover and occasional insolvencies resulting from catastrophic weather events.

The “downside” scenario envisages climate “tipping points” being reached due to the continued heavy use of fossil fuels, the world being forced into costly and difficult adaption and widespread insurance market failure.