How the P&C industry can step up after the UN’s latest climate change warning

The world is approaching a dangerous climate threshold, but if action to reduce greenhouse gases (GHGs) is taken swiftly across all sectors, including insurance, it is possible to avert catastrophic warming, says a new report.

There may be more opportunities for the industry to take action in a variety of ways, from closing protection gaps, to tracking and reducing greenhouse gas emissions, to reducing coverage for carbon-emitting customers.

For CEO of Aviva Canada Jason Storah, he challenges the industry to assert itself and set the bar higher than his own company 2040 Net Zero Climate Change Planhe said in an interview with Canadian insurer earlier this month.

The world will probably miss it climate target (limit warming to 1.5 degrees Celsius above pre-industrial temperatures) within a decade, a report found by the United Nations Intergovernmental Panel on Climate Change.

If the world continues on its current course, the report says, climate catastrophes will become so extreme that humanity will be unable to adapt. Consequently, the adverse impacts from human-caused changes will intensify, leading to water scarcity, famine, more extreme weather and NatCats, starvation, and other adverse impacts that cannot be reversed.

This is a cause for concern for the insurance industry, which is noting Consumer protection gaps for NatCats are growing worldwide and in Canada.

The IPCC therefore calls on all economic sectors to reduce their greenhouse gas emissions.

Earlier this month, Canada’s federal solvency regulator announced Guideline B-15: Climate Risk Managementproperty insurers need to develop further key figures on their GHG emissions, including preventive measures to counteract climate-related risks.

“In this decade, accelerated action on climate change adaptation is essential to close the gap between existing adaptation and what is needed,” the IPCC press release said. “Keeping warming to 1.5°C above pre-industrial levels requires deep, rapid and sustained reductions in greenhouse gas emissions across all sectors. Emissions should now be declining and will need to be almost halved by 2030 if warming is to be limited to 1.5°C.”

Measures must now be taken to reduce the consequences of climate change, the IPCC has called for.

This represents an opportunity for the P&C industry to step up when it’s needed most, say Canadian P&C industry executives.

When calling with KU Earlier this month, regarding Aviva Canada’s 2022 financial results, the company’s CEO, Jason Storah, indicated that his company intentionally set an ambitious climate target. And he thinks the rest of the P&C industry should follow suit.

“My take on this is really simple,” Storah said. “Fighting the climate is a team sport and it requires everyone to play a role.”

Aviva plc aims to become a net zero carbon company by 2040. Key elements of the 2040 Net Zero climate change plan include:

• Net-zero carbon emissions from its investments by 2040
• A reduction in the carbon intensity of its investments by 25% by 2025 and by 60% by 2030. This is above the 50% reduction required by the Paris Agreement
• Net zero carbon emissions from own operations and supply chain by 2030.

“We came out with a really high ambition,” Storah said. “Nobody in Canada has tried to match that ambition, let alone surpass it. And I would tell people, ‘Try to beat us. Take a look at what we do – do better. Then raise the bar.” Because I think we need some healthy competition in the industry and people looking at what companies are doing.

“Hopefully we’ll see a little bit more momentum across the industry.”

Both the UN chief and the IPCC underscore the urgency of taking more ambitious action. They urged the world to phase out coal, oil and gas, which are responsible for more than three quarters of global greenhouse gas emissions.

Some insurers have already started doing this Reduction of coverage for large CO2 producing customers in sectors such as energy, oil and gas, and in Canada, the Athabascan tar sands.

Featured image from iStock.com/myshkovsky