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“Climate change is one of the biggest risks we face, so insurers naturally have a huge role to play…” Sian Fisher, CEO, Chartered Insurance Institute

December 23, 2019

2020 will not be yet another new year! With it commences the countdown to 2030 by when together we must all – individuals and businesses – work towards achieving the expectations set by the Paris Climate Agreement. Insurers have not only been generally slow in waking up to this challenge, but many continue to ‘aid and abet’ the Climate Crisis.  The growing role of Asia in global economy, higher propensity to natural catastrophes and an aging society – makes it more vulnerable to Climate Crisis than any other geography.

As an inspiring leader, Sian Fisher, CEO, Chartered Insurance Institute, has demonstrated how the insurance industry can successfully lead the financial services in the Diversity & Inclusivity space. In this interview, Sian shares her vision on dealing with Climate Change, how some of the European players are already leading the way, a transitioning protocol to mitigate the carbon trail and some of the pathbreaking work undertaken by the Chartered Insurance Institute. (Also published on the CII blog).

PG:  How could and should insurers and reinsurers influence businesses responsible for carbon emissions?

SF: There are four key ways in which insurers can influence carbon emissions:

Most importantly, insurers can help organisations look at risks in a holistic way, advising them on how they can manage climate risks and manage reputational, regulatory, legal, technological and physical risks. As a member of the organisation Climatewise, we have sponsored guidance on a ‘Transition Risk Framework’ for use by our members:

https://www.cii.co.uk/news-insight/insight/articles/the-climatewise-physical-and-transition-risk-frameworks/83301

https://www.cisl.cam.ac.uk/resources/publication-pdfs/cisl-climate-wise-transition-risk-framework-report.pdf

Second, during the underwriting process, insurers can look at the total risks of a project, including the potential reputational and regulatory risks of activities that result in high carbon emissions, and factor this into pricing. However, it is more effective to have a dialogue with clients before the underwriting process, either between the insurer and the client, or between the broker and the client, about managing the risk, rather than waiting for the pricing stage of the process, when decisions may have already been taken that may not be able to be reversed. We should also remember that pricing decisions can work in different ways. For example, timber-framed buildings are attractive from a carbon point of view, but can be more vulnerable to fire in the construction stages, and if they are not maintained properly. As always, it is important to look at all the risks of a project, and not just one aspect.

Third, insurers can approach the way they invest their funds in a way that is sustainable from a carbon point of view, as Zurich, Aviva and many other insurers have done:

https://www.cii.co.uk/news-insight/insight/articles/the-climatewise-physical-and-transition-risk-frameworks/83301

https://www.aviva.com/social-purpose/responsible-investment/

Fourth, during the claims process, insurers can help repair and rebuild so that replacement structures are more carbon efficient.

PG: Increasingly, more and more European insurers and reinsurers are moving away from investing in fossil fuels. Would you expect this to be replicated globally?

SF: Yes, there are strong reasons for moving away from fossil fuels in terms of avoiding reputational or legal risks. In future, it is likely that governments will develop more financial incentives to encourage investment in and use of renewable energy rather than fossil fuels, so in the long term this does make sense.

PG: Do you see room for Climate Change as a standalone subject in insurance and risk management syllabi?

SF: Many people think of the CII and think of exams straight away, but people tend to take exams early in their career, and then look for a wider range on ongoing materials and training to keep their knowledge up to date. As a result, we would like to integrate climate change into many of our syllabi (as we already do, for example for investment advisers) and then offer tailored materials and CPD, such as the Transition Risk Framework to members. That way, we can reach all our members, and not only the ones that are in the exam phase of their professional development.

We would like to integrate climate change into many of our syllabi (as we already do, for example for investment advisers) and then offer tailored materials and CPD, such as the Transition Risk Framework to members.

PG: In your view, is there a role for insurers in transitioning societies towards a carbon neutral existence?

SF: Yes, insurers exist to help individuals, families and organisations to manage risk. Climate change is one of the biggest risks we face, so insurers naturally have a huge role to play in helping society manage it.

PG: Many thanks. Here is wishing you Merry Christmas and A Happy New Year!

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2 Comments
  1. Judy Lu permalink

    Very good and insipring interview, thanks for sharing!

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