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GIRO 2007 - Opportunities for Mitigation

New products

Many non-insurance companies are actively investing in developments and research in areas designed to mitigate climate change. Examples of these are: geo-thermal energy; wind-farms; solar energy; hydro energy; carbon sequestration; hybrid vehicles; biomass. All of these developments will also lead to developing risks which will require insurance solutions.

The Clean Development Mechanism (CDM) was set up under the Kyoto protocol to enable countries to invest in greenhouse gas reduction projects in other countries and use this to offset their own carbon footprint. Such projects run the risk that they will not deliver the greenhouse gas reduction they expected; and if CDM credits have been sold there is a liability to deliver which can discourage capital providers supporting such products. Swiss Re and RNK Capital have worked together to provide insurance against this risk.

Other more “blue-ocean” product examples could be to extend the recently developed insure-as-you-drive policies to include offset-as-you-drive. These ideas could also be extended to other insurance products, such as travel or home insurance. Our Wiki site includes some detailed commentary on the subject of Carbon Offsetting.

In all these examples non-life insurers can simultaneously open up opportunities for profitable new products and by offering these products facilitate the mitigation of the risks they face from climate change.

Use influence as a major investor

See the section on assets for a more detailed discussion on this. Some non-life insurers can have major influence as investors either as equity owners of the business or as corporate bond holders.

Supply change influence

Insurers have huge purchasing power. After a claim we are involved with rebuilding, and also removal of waste. We can ensure that this is done in a sustainable way. If waste has to be removed, can it be recycled? If not, can it be disposed of in an environmental way. If new products have to be used are low carbon products available that could be chosen in place of others? Are the materials resilient to further future events, such as flooding or windstorm? This can reduce the long-term cost of claims and hence of premiums? How can we encourage our policyholders to choose these options when non-life cover is by definition short-term?

Lead from the front

Non-life insurance companies can get their own houses in order, for example by looking at areas such as energy efficiency of properties and recycling. As well as being the right thing to do and playing a part to mitigate the risks from climate change, this can increase a companies reputation with both activitist investors and with environmentally conscious customers who are looking at their credentials of their supply

chains (i.e. other companies adopting the previous two strategies).

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