Nature Risk Management in Insurance

Nature risk is rapidly becoming the next big sustainability challenge, opportunity and agenda item for Insurers. In a survey conducted by the Sustainable Insurance Forum (SIF), almost 50 percent of Insurers surveyed recognised nature risks as financially material to their underwriting business. Accordingly, understanding and managing Nature Risk is a topic that a lot of Insurers are trying to grasp and be early beneficiaries of the longer-term advantages of leading nature risk management. 

Unlike climate risk, currently there is no mandatory regulation for disclosure on Nature Risk. However, there is an expectation that firms will be required to adhere to International Sustainability Standards Board (ISSB) and Corporate Sustainability Reporting Directive (CSRD) requirements in the next two to three years. The TNFD has published a set of disclosure guidance for voluntary uptake. Some of the leading composite insurers are quickly acting on the voluntary disclosures, leading as an example for their key stakeholders, resulting in longer term gains and competitive advantages.

The sustainability of the environmental assets is underpinned by biodiversity. Society, including financial institutions, depend on and can impact Nature. Losses from Nature Risk are already impacting businesses, including rising goods prices, reduced talent retention, job losses, global health concerns, economic development and climate change.

There are challenges with assessing and manging Nature Risk and is viewed by some as hard to implement and embed successfully for insurers. However, there is an opportunity for insurance firms to leverage the proven approach for climate risk management to accelerate a robust approach development and implementation for successful Nature Risk Management.

To find out more and see what this means for you, take a look at our framework approach and get in touch.