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Insurers ‘uniquely positioned’ to build resilience to climate shocks: UN’s Hart

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The insurance industry is uniquely positioned to bolster the transition to net zero and improve resilience to climate shocks, according to Selwin Hart, UN assistant secretary-general for climate change.

In a speech at an Insurance Development Forum (IDF) event during COP26 in Glasgow – in which he discussed insurance programs that plan to connect the sector’s risk-assessment capability with the challenges of tackling climate change – he said: “We need insurance companies as institutional investors to transition their portfolios and investments and align with pathways for net zero by 2050.”

Hart commended the insurance industry for establishing the Global Risk Modelling Alliance, developing a Global Resilience Index, and agreeing to support the Vulnerable Twenty Group of Ministers of Finance (V20) for 48 climate-vulnerable countries.

An agreement between the IDF and the V20 seeks to build risk-analytics capability where it is most needed.

The IDF and Start Network, which represents around 50 humanitarian charities, have also created a service called Start Ready to help charities better understand natural perils and potentially secure disaster financing.

Further, the United Nations Development Programme (UNDP) recently unveiled its Insurance and Risk Finance Facility (IRFF), which aims to increase the role of insurance and risk-financing in development globally.

Over time, the goal will be to leverage the balance sheets of reinsurers and ILS funds to protect vulnerable communities from the impact of climate change.

Hart said: “Already, 60 institutional investors have joined the Net Zero Asset Owner Alliance that was convened in 2019 – the gold standard for credible commitments and transparent targets which is managing $10tn in assets.”

He also noted the formation of the Net-Zero Insurance Alliance, which was launched in July in a bid to transition underwriting portfolios to carbon neutral by 2050.

Hart said he believed risk managers in the insurance industry needed to lead the way to strengthening climate-change resilience.

“This is an area where we have seen major progress,” he said.

Going forward, he said, the insurance industry will need to provide affordable and flexible sector-based insurance solutions for the poor, as well as expand country coverage and access to premium and capital support.

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