Howden recommends that corporates should engage with the industry from an early stage in their climate risk management planning to ensure there is sufficient supply of capacity and long-term coverage. Produced in partnership with Boston Consulting Group, the report argues that this could be a “game changer” in unlocking climate finance at the necessary speed and scale.
The report also found that insurance premiums for climate resilience and natural catastrophe protection will increase by 50% by 2030, reaching $200-250 billion due to increased incurred losses from climate events, climate risk disclosure, and the government transfer of risk to private markets.
Howden stated: “These stresses will place unprecedented structural pressure on insurance systems across public, private, and mutual markets, and there is no guarantee that the market will meet this demand.”
The firm added, “While insurance promises to be a great enabler in unlocking the transition and adapting economies to a new climate era, it will require a paradigm shift in how risk management is prioritised if climate finance is to be deployed and businesses are to secure their futures.”
The report advises companies to shift from viewing insurance as an annual procurement exercise to adopting a long-term view of risk. Partnering with insurers could lead to multi-year deals and more advanced analytics.
Rowan Douglas, CEO, Climate Risk and Resilience at Howden, commented: “Insurance is the financial bedrock needed to de-risk investments and attract the additional capital necessary to mobilise the climate transition. Astute companies are now elevating future insurability to boardroom level discussions because it will be essential to maintain access to capital. The key is developing long-term partnerships with insurers to build shared expertise and trust and optimise future access to scarce underwriting capacity. The alternative is an invitation to climate valuation risk.”
Lorenzo Fantini, Managing Director and Partner at BCG, added: “Achieving net zero and climate resilience with adaptation strategies is an unprecedented challenge for all economies. Without sufficient insurance to de-risk markets, a smooth transition will be impossible. The insurance market must lead the de-risking dialogue to ensure the insurability and bankability of climate action.”
Alongside the publication of the report, Howden has announced a collaboration with the UN Climate Change High-Level Champions to work with partners in building an Enabling Climate Insurance Breakthrough.
Nigar Arapadarai, UN Climate Change High-Level Champion for COP29, reflected: “Managing risk is one of the biggest barriers to a just and resilient transition. Insurance can provide the certainty, clarity, and security to achieve the radical transformation needed and will be instrumental across sectors and industries globally to shape a net zero, fair future for all.”
