As the consequences of climate change endure, further industry regulations will be required to halt its effects

Discussing impacts and solutions to the climate crisis at Day One of the Dubai World Insurance Congress 2023, panelists in the ‘Sustainability and Insurance’ session stated that regulatory ‘force’ and industry collaboration was needed.

Chaired by Helen Yates, editor of Global Reinsurance, the panel featured Atish Suri, CEO for India, Middle East and Africa at Guy Carpenter, Mohamed Alali, Senior Executive Officer of XL Re Europe SE, Dubai, Jasmin Fichte, Managing Partner for Fitche & Co, and Atinc Yilmaz, Regional CEO – Turkey, North Africa & The CIS Countries, Howden Brokers.

Regulatory force

Asked how the industry will take on climate and environmental issues, one panelist stated: “We have known about climate change for decades. At the beginning it was viewed as some alternative nonsense.

“In terms of dealing with it now, that will have to be driven by force – by specific regulations. The policymakers in our industry will be vital. The solution to climate change will come via the right laws.”

While another panelist agreed that such ‘force’ was an important solution, they stated there are considerations to ponder on how much force is reasonable.

“Regulatory pressure is always the easiest tools in order to achieve these goals. However, there will also be social pressure towards it [finding a solution]. The next step is shareholders pressure because the corporate world wants to be associated with the right values,” said the panelist.

“It is extremely important that we hold these values ourselves, pass them on to our clients and be associated with the right clients.”

Industry collaboration

One of the upshots of COP27 in Egypt last year was the need for industry collaboration, an aspect the insurance space must foster, the panel stated.

“The path to Net Zero will be a collaborative one for the insurance industry. Growth is needed – $132 trillion in funds or investments is required by 2050 to really tackle this issue,” said the panelist.

“How do we maintain the momentum that we need for climate action? We need to work collaboratively in order to stay focused over the next few years.”

Rewarding ESG

One panelist stated that another means to drive climate action is to reward any organisations with clear sustainability aims.

“Corporates which have obtained a high ESG [Environmental, Social, and Governance] score, tend to be a better risk to underwrite,” said the panelist.

“If you have a good or high ESG score, it means that you will be a preferred company for the markets, which means you will be able to attract the capital and be able to finance your risk.

“So should those companies be rewarded [by the insurance industry] for high ESG scores or potentially hitting their sustainable development goals? Perhaps they could be offered a discount on their underwriting premium?” added the panelist.

Another panelist agreed on offering discounts for ESG compliant companies, stating: “Ultimately, you charge a price based on the risk that you take. Align yourself with the right clients – ones which are aligned with your vision towards sustainability – and those risks will ultimately have a better price.”