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Green push raises industry's climate role

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S&P Global Ratings says the recent United Nations climate summit in Glasgow “could prove a turning point” for the insurance industry as global efforts to contain carbon emissions accelerate.

The focus on adaptation at the COP26 gathering highlights the opportunity for insurers and reinsurers to showcase their longstanding expertise in weather and climate modelling and risk management to help those most at risk from climate change to build resilience.

Industry-led initiatives such as the Insurance Development Forum, Global Resilience Index Initiative, and the Global Risk Modelling Alliance will enable insurers to leverage this expertise in working with governments, multilaterals, and local communities to improve their ability to assess, measure, and ultimately reduce their risk from climate change.

“COP26 could prove a turning point for the insurance industry's role in keeping 1.5 degrees Celsius alive,” S&P said.

“Facilitating adaptation initiatives and steering capital toward resilience and net zero requires the insurance industry take a more prominent seat at the table and leverage its unique position as risk managers, underwriters, and investors.

“This opens the door to new insurance products to protect these communities, but also enables better economic resilience that can lead to more insurable assets and new customers.”

S&P says non-life insurance providers will play an important role in helping the global economy make the green transition as nascent and new technologies such as renewable energy sources become more mainstream.

“Insurers will need to consider how they can develop products and policies that can protect businesses and investors in these technologies as they develop and grow to economies of scale that make them more competitive than traditional practices,” the rating agency said.

S&P says the industry’s influence extends into the investment side of thing as well, given insurers own nearly 10% of the world’s invested assets.

The industry will be influential in determining how capital will flow towards sectors, projects and technologies that will help achieve the 1.5-degree target.