Businesses are increasingly looking at current and future climate change impacts on their operations and are seeking advice and assistance from the insurance industry, global broker Aon says.

Global Head of Climate Strategy Richard Dudley says concerns are widespread and have come more into focus as regions are variously affected by windstorms, drought, rain, flood, heatwaves and wildfires.

At the same time regulatory and legal actions related to net zero commitments are having a rising impact, particularly with momentum driven by the United Nations 26th summit in Glasgow, known as COP26, which reaffirmed commitments aimed at limiting global warming to 1.5 degrees Celsius.

“A lot of countries in the world have signed up to COP 26, and that impacts every business, every public sector body in every country around the world, in terms of both how the climate is changing and how we're going to transition to net zero, and the risks and opportunities,” Mr Dudley told insuranceNEWS.com.au during a visit to Australia.

Mr Dudley, who took up the newly created strategy role at the start of the year, says Australia is an example of challenges faced around the world, with the political environment on climate shifting with this year’s federal election, while the country has a major coal sector and has felt climate event impacts.

Aon identifies key significant areas as improving resilience, managing the transition to net zero and unlocking investment opportunities.

Mr Dudley says the insurance industry may need to consider a longer focus for policy duration in some areas, with property policies typically renewing annually, while the industry will need to enhance its technical capability in pricing risk in looking forward, having historically used evidence from the past to forecast the future.

Greater collaboration across the industry and externally will be need to address the range of issues emerging, he says.

“No one firm can do this on their own,” Mr Dudley says. “To build sustainable markets that are going to help to drive this change the world needs, we're going to need to collaborate more across the industry, and also between the layers between insurance and reinsurance, and with the clients at the front end.”

Mr Dudley says insurance industry innovation offers the opportunity to free up investment flows and tap wider sources of capital, as it plays a critical role in supporting the transition, including for those sectors under the most pressure.

“Our view is we should be engaging with all of these industries to help drive change quicker,” he said. “For me, it's about engagement, not exclusion. I think that's a view that we have as Aon.”

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