The risks from climate change we face is not merely the destruction of our portfolios; not merely the loss of life because of severe weather incidences; not merely the risk of not adapting; and not having our societies consigned to having a 19th/20th century paradigm while the world needs to move on. It is a much more severe risk. Discussions with scientists today talk about climate change and extinction.
The time has come to act…we have to find a way to do more because of the nature of the risks we face. There are two things we need to do: we have to drastically reduce emissions by 50% by 2030 and we have to ‘prepare’ because climate change is certain. It will impact our insurance portfolios, impact our societies and the vulnerable and poor in the world.
How can we prepare? One thing the insurance industry is good at is the mutualisation of risk. This is the key solution going forward and the anticipation of risk and the advisory support that insurance can offer about what to do about that risk in advance. We need to ensure the most vulnerable have some form of protection either by the state or mutual insurance schemes, such as microinsurance, and that governments act.
The ironic thing is that we know what to do and that the solutions are there. The science is wonderfully developed, and we know the capital costs to address climate change is around USD 9.2 trillion a year. This is what has to be invested in climate solutions. Two thirds of this is not new capital but merely a reordering of capital flows.
Resilience is also a key part of what we now need to address. We need to make sure we tackle not just physical resilience but social resilience, economic and ecosystem resilience as we go forward.
We need to expand the availability of risk protection through insurance. We need to provide protection for emerging markets and protection for the poor. We need a massive expansion in insurance cover. As we have seen in richer countries, we need to see a mandatory provision of accident compensation insurance available everywhere.
Climate resilience has to become mandatory with the premiums for the poor paid for paid by the State, like the NHS in the UK. Without this we will see massive impacts that people cannot recover from including migration and the collapse of vulnerable societies that people can never recover from.
“We are lucky, we have a privilege, the privilege to be able to do something when most of the world doesn’t have that privilege. It’s a privilege we must use with care and we must act on.”
