Insuring the climate transition

Climate change is happening faster than anticipated. The insurance and wider risk management sector stands at a pivotal point, with numerous opportunities to help businesses shift towards renewable energy sources and low carbon business models. In 2023, global economic losses from natural disasters amounted to US$380 billion, with only US$118 billion covered by insurance. The repercussions extend beyond financial losses, affecting human health, causing business interruptions, disrupting supply chains, and prompting regulatory and legislative changes. As the world strives for a more sustainable future, the insurance industry's role in facilitating the net-zero transition becomes increasingly crucial.

In this report, by Deloitte and Aon, we explore the path for insurers and their customers to foster a deeper understanding of the risks at play to drive scalable and efficient solutions. To discover these evolving (re)insurance needs, we interviewed 30 experts spanning EMEA, North America and APAC regions.

We identified four transition challenges that may hinder risk (transfer) solutions in facilitating the climate transition:

1. Insurance is an afterthought for transition projects.
2. Insurance is sometimes mismatched to the longer-term needs of a transition.
3. Insurers are largely product-led instead of solution-oriented in their approach to help with the transition.
4. Climate transition commitments from international reinsurers are often misaligned with those from insurers in emerging markets.

We discuss each of these challenges in the report but ultimately, we believe that the risk (transfer) solution industry is a critical enabler of the climate transition, one that can prevent inadvertent delays in the global shift towards a low carbon future. It is therefore becoming increasingly important to think of ways to combine risk, engineering, and financial acumen to better manage the risks associated with climate change.

We encourage you to reach out to further discuss the findings within this report and how it applies to your business.

Learn more in our related report, Financing the green energy transition.