Insurers have taken significant steps but more is needed to combat climate change, say industry leaders at the World Insurance Forum

Despite the industry being “underwhelming” in communicating its climate change initiatives, the sector has taken some significant steps, said Swiss Re CEO Jacques Aigrain.

Speaking during a panel discussion at the World Insurance Forum, Aigrain said the industry had acted “at a time when the bandwagon was not even on the rails yet”. The Climate Wise principles, launched last year, was one such initiative of which the industry should be proud, said Lloyd’s chairman Lord Levene.

Leaders on the panel agreed that more action was required, particularly in areas that would affect consumer behaviour.

Levene said he believed a pricing structure was needed to discourage people from living in exposed coastal areas.

Unfortunately, charging coastal dwellers more premium in the US often has political consequences, acknowledged Levene. “People say: ‘Why should it cost so much more in Florida?’ Then they subsidise it.”

“People say: 'Why should it cost so much more in Florida?' Then they subsidise it

Lord Levene

Brian O’Hara reminded delegates that the risks posed by climate change were not just isolated to the US. Emerging market countries would also need to prepare for the unexpected.

“Coming to a place like Dubai, the growth in insurance values in the emerging world is staggering,” he said. O’Hara added that a super typhoon last year had come very close to the city of Shanghai in China and was potentially devastating. “These are the things that haven’t been tested yet,” he warned.

Speakers agreed that if cover was withdrawn from the worst polluters, it could engender better environmental behaviour.

But if would be difficult to enforce, said Aigrain. “Even if some parts of the industry tries to be strict, other parts of the industry will think it’s a nice place to play.”

“We are a much more fragmented industry,” said O’Hara. “Insurance doesn’t have anything like the homogeny of the banking industry.” He added that many indigenous insurers in emerging markets would “go their own way”.

“Even if some parts of the industry tries to be strict, other parts of the industry will think it's a nice place to play

Jacques Aigrain

This appeared to be backed up by a separate comment in a later discussion. Ali Al-Subaihin, CEO of The Company for Cooperative Insurance (Tawuniya), said: "Global warming is not an issue for us."

He pointed out that in Saudi Arabia summer temperatures reach 45 degrees C. One degree above or below this does not make a great deal of difference to the overwhelming heat. “If you don’t have snow caps who cares about global warming? We have bigger issues than global warming."

Using the example of consumer activism, which has become prevalent in the last decade, Lord Levene said insurers could become agents of change. Manufacturers have got rid of sweatshops because consumers demanded it, he reminded.

“It can happen,” concluded Levene, “but it will require a super human effort.”