Increasing insurance costs are like a bill for climate change: Swiss Re CEO

Summary

The transcript discusses the acceleration of climate action within the corporate sector, despite geopolitical distractions. The speaker, a co-chair of the Climate Alliance, highlights the commitment of 126 companies to achieve net-zero emissions and their efforts to engage suppliers in this initiative, which is expected to create a significant network effect. The discussion also touches on the challenges faced by green projects due to inflation and the rising costs of materials and insurance. The speaker predicts that insurance premiums, which have been increasing due to underpricing and the heightened risk of natural disasters, will stabilize, serving as a societal feedback on the impacts of climate change. The conversation concludes with a clarification on the limitations of insurance coverage, particularly regarding war and conflict, which are not insurable risks due to their non-random and human-induced nature.

Takeaways

• 🌏 The speaker believes that despite geopolitics taking center stage, companies are accelerating their efforts towards net-zero emissions behind the scenes.
• 📈 The speaker co-chairs the Co-Climate Alliance, which consists of 126 companies committed to achieving net-zero emissions and being science-based targets (SBT) compliant.
• 🔄 The movement towards net-zero is expected to be revolutionary in the next two to three years, with companies not only working on their own emissions but also signaling to their suppliers to reduce emissions (scope three emissions).
• 📊 The speaker anticipates a snowball or network effect, where the collective efforts of companies will lead to exponential growth in environmental initiatives.
• 🤔 Some CEOs on a panel expressed a more incremental view, expecting a steady rather than an exponential growth in environmental initiatives.
• 💡 The speaker emphasizes that CEOs view the transition to a net-zero world as highly probable and are preparing for it, even if they personally do not believe in it.
• 📉 The macroeconomic situation, particularly inflation, affected green projects last year, making them unprofitable due to increased costs of materials and insurance.
• 💼 The insurance and reinsurance industry has been adjusting to increased losses from natural catastrophes, leading to a repricing of premiums.
• 💡 The speaker suggests that insurance premiums serve as a feedback loop to society about the impacts of climate change, prompting reflection on future construction and location decisions.
• ❌ There is a misunderstanding about insurable risks, with war being explicitly excluded as it is not a random, insurable event but a human-induced one.
• 🚫 The speaker does not comment on specific cancellation clauses in policies related to broader Middle East conflicts but highlights the general principle that war is not insurable.

Q & A

What is the current state of climate change discussions in the context of geopolitics?

Climate change discussions are overshadowed by geopolitics at the moment, but behind the scenes, there is an accelerating movement towards addressing the issue.

What is the role of the Co-Climate Alliance in the corporate sector?

The Co-Climate Alliance consists of 126 companies committed to achieving Net Zero targets, reporting on their progress, and ensuring compatibility with science-based targets.

How are companies planning to address their carbon footprint beyond their own operations?

Companies are not only working on their own Scope 1 and 2 emissions but also sending signals to their suppliers (Scope 3) to encourage them to reduce their carbon footprint.

What kind of support is available for smaller suppliers to help them reduce their carbon footprint?

There are resources and certain rules being developed to assist small and medium-sized companies that may not know how to reduce their carbon footprint.

What is the expected impact of these corporate actions on the broader economy?

The actions are expected to create a snowball or network effect, leading to exponential growth in the adoption of sustainable practices.

How do CEOs perceive the transition to a Net Zero economy?

CEOs view the transition to a Net Zero economy as highly probable and inevitable, which is why they are preparing for this new world.

What is the impact of inflation on green projects?

Inflation has made even promising green projects unprofitable due to increased costs of materials and other resources.

How has the insurance and reinsurance industry responded to recent natural disasters?

The industry has had to increase premiums due to an underestimation of natural disaster risks and the rising number of losses in recent years.

What is the role of insurance premiums in reflecting societal actions on climate change?

Insurance premiums serve as a feedback mechanism to society about the consequences of climate change and can prompt thought on future construction and development practices.

Is there a misunderstanding about what insurance can cover in terms of geopolitical risks?

There is a misunderstanding that insurance can cover war and conflict, but these are not insurable risks as they are not random acts and are human-induced.

What is the current state of insurance premiums in the context of increased natural disaster risks?

Insurance premiums are stabilizing at higher levels to reflect the increased risks of natural disasters.

How do insurance companies view their role in providing feedback on societal risks through premiums?

Insurance companies see their role as providing feedback on societal risks and offering coverage for those risks that are insurable, while also encouraging thought on risk management and mitigation.