Between a declining delta and a rising omicron: “Engagement with customers on Climate Risks, not exclusion, the best way forward!”

Thanks to a friendly intervention and this invitation, I had an opportunity to revisit the ‘Climate Change Exclusion’ clause and read it between the lines. Happy to note that anthropogenic gets attributed directly or indirectly to human activity. Having said that, there is a problem with our siloed thinking. Even though issued for the liability teams, the fiduciary responsibility could very well make this omni applicable to any other class/es of business.

If an insurer or a reinsurer were not to hold a subject matter covered (redline) against Climate Change – should it be investing (as an investor) in any such business? If it still does, would it not be oxymoronic? And if it stops doing so, that would be a truly benign influence of this clause!

Key messages

As Climate Change nudges insurers out of their comfort zone; Institute of Public Policy Research warns us of new emerging risks; Financial Protection Forum (World Bank Group) reminds of assessing financial risks from physical climate shocks; ESMA classifies Climate Risk as a new distinct risk category; Patrick Flynn of Salesforce shows the way forward as climate pledges crumble under scrutiny; there are many a slip between the cup and the lip – whilst dealing with Science Based Targets initiative (SBTi)!

Strategy is no longer bounded by shareholder value, reinforces Alison Taylor. And insurers must quickly change too. Textile consumption, for instance, has the fourth biggest impact on the environment and climate change – after food, housing and mobility! Ah, the magic of marketing. Insurers – watchout for greenwashing! Embedding sustainability is work in progress. But we do not have time.

Transition to low carbon economy has its opportunities and threats. Can the insurance industry support this critical transition? There is a price to be paid for fundamental changes in the business models. Insurers must assert as stewards. How can we forget pricing nature in insurance? Remember both TCFD and TNFD will hold insurer boards responsible for aiding and abetting biodiversity loss.

Carbon removal remains unproven, thus net-zero could be a mirage. Fossil fuel must go. Without action, WHO and The Lancet tell us, both excess morbidity and mortality can be expected. Climate litigation is here and insurers are bound to get enmeshed. Australia has shown how tort is good enough pending ecocide codification. Reputation and existential risks as a quid pro quo for procrastinating? A rather heavy price…