A significant push to counter climate change could come from insurance companies, which in 2016 had to pay $50 billion to cover damages linked to extreme natural disasters.
The climate issue concerns, without exception, every living being on the planet, yet, as we know, the economic argument is often more than sufficient a motivator for our species. It is precisely for this reason that insurance companies could soon be found among the strongest advocates for the fight against climate change.
In 2016, insurance companies had to pay fifty billion dollars to cover damages linked to extreme natural disasters, nearly twice the amount paid in 2015, when the figure stood at around $27 billion. The most significant losses, according to German insurance group Munich Re, were caused by the earthquakes in Japan and the devastating floods that struck China.
Munich Re belongs to the category of reinsurance companies. Reinsurance is a practice that concerns relations between insurance companies, whereby one company offloads part of the risk assumed from its own clients by transferring it in turn to a second-tier company. Reinsurers operate, for example, in the sectors of insurance for oil platforms and damages arising from natural catastrophes or from satellites. "Losses in a single year are obviously random and cannot be seen as a trend," said Torsten Jeworrek, a board member of Munich Re. "However, the high proportion of uninsured losses, particularly in developing countries, remains a concern."
In light of these considerations, insurance companies have begun incorporating the fight against climate change into their own policies with increasing conviction. According to a survey conducted by the NGO Ceres, 22 out of 148 insurance companies surveyed take climate change seriously into account when assessing risks. These include American International Group, Hartford Financial Services Group, Manulife Financial Corp., Travelers Cos and Zurich Insurance Group. Other companies, such as Allied World Assurance Co., State Farm, Renaissance Re and Xl Group, have instead severed ties with the Heartland Institute, a US organisation linked to the American conservative right, which denies human responsibility for climate change and regards it as a "cyclical phenomenon".
The insurance sector is finally taking on a more active role in reducing the disasters that follow from rising global temperatures. With large amounts of capital at their disposal, insurance companies can finance the adoption of instruments that make possible the transition towards a low-carbon economy.