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26 February 2017
The global insurance industry got its marching orders on climate change last week from an international figure whose opinions often provoke controversy.
But Prince Charles was among friends in London when he told insurers they have a key role to play in the way the world deals with the climate change phenomenon.
The annual International Insurance Society (IIS) seminar, which brings together insurance leaders over three days, pulled a last-minute change to its program to bring together a range of climate change reaction experts and leaders.
The IIS calls the insurance industry a “crucial stakeholder” in meeting the challenge of global warming, and the list of luminaries who turned up for the summit meeting – or in some cases beamed in – reflects this.
Apart from Prince Charles, speakers included an equally passionate climate warrior, American billionaire Lynn de Rothschild – whom the prince described as “a force of nature” – plus leading figures from the United Nations and the World Bank, a long list of economists and scientists and, of course, insurance industry leaders such as Willis Chairman and CEO Dominic Casserley, whose company co-sponsored the event, and Lloyd’s Chairman John Nelson.
To the Australian observer, two things were immediately obvious: the debate over whether climate change exists or not is no longer relevant – it exists, and the only issue now is how to handle its effects; and the Australian Government’s lukewarm approach is out of step with European and US governments in particular.
insuranceNEWS.com.au was a gold sponsor of the IIS conference, and the presence of Prince Charles ensured a good media turnout, with London reporters on the lookout for something controversial.
Prince Charles’ call for deeper insurance industry involvement in the issue followed his plea a few weeks earlier for global business leaders to take tough choices over climate change and capitalism, even if it makes them unpopular.
At a conference on “inclusive capitalism” organised by Lady de Rothschild, he said the world is “at the mercy of people vociferously and aggressively denying the current operating model is accelerating climate change, which could destroy the world”.
“We can choose to act now before it is finally too late, using all of the power and influence that each of you can bring to bear to create an inclusive, sustainable and resilient society,” he said.
The prince’s speech to insurers was more of the same, but appropriately focusing on the role of the industry and challenging it to work with governments and agencies to devise risk mitigation programs.
“What we need now are substantial and measurable commitments,” he said. “Nothing else will do.”
He restated his long-held conviction – “tested and honed in the fight for, I suppose, the past 40 years” – that truly sustainable development has to be founded on the principles of resilience and a proper appreciation of risk.
“They in turn are underpinned by fundamentals related to ecosystems’ functionality, and the health of natural systems and the need for us all to live in harmony with the environment that sustains us.
“You might think disaster risk reduction is a matter in which every sector of society should be fully engaged, but I’m told only half of the countries currently assessing progress against the existing frameworks report any engagement by business on disaster risk management. That seems incredible.”
He says insurers, banks, financial institutions and investors have a role to play in assessing the risk to their businesses posed by climate change and associated natural disasters.
“And mark my words, the risks are untold and catastrophic.”
Prince Charles believes development and humanitarian aid agencies are compromising their abilities by spending most of their resources on addressing immediate post-catastrophe humanitarian needs, “rather than taking the steps needed to prevent and mitigate tragedies beforehand”.
“In recent years many advances in areas including climate science and the assessment of big data mean this is an increasingly outdated approach,” he said.
“Put simply, a comprehensive understanding of risk, including the risks of climate change, the food-water-energy nexus and resource scarcity is increasingly straightforward.
“It is also the best possible way a company or a nation can align its incentives and secure its prosperity in the long term.”
He has long been an advocate for this, saying placing companies and governments’ exposures to catastrophes “would certainly concentrate the mind, just as integrated and natural capital-reporting initiatives do”.
He also believes impending talks on revising the Hyogo framework “offer an excellent opportunity for the public and private sector to work together on establishing the approaches to make us capable of developing much more prescient, precise and holistic risk governance in the future”.
Among his issues of critical concern is the fact there is no common methodology to assess the cost and impact of disasters. “This makes any effort arriving at an accurate evaluation and planning process quite complicated.”
The prince also repeated his warning that there’s no time to waste in addressing climate change issues.
“We have to react if we are to broker the ambitious, far-reaching, equitable and indeed visionary combination of international agreements we need in order to set the world on a more resilient course.
“For a precautionary approach to be effective we need a proper understanding of the risk and a clear and precise set of actions that we can take… soon and decisively to mitigate the problem.
“What on earth is the point in waiting until natureʼs bank goes bust too?”
Warning “as a grandfather” that we should not leave the world in “a beastly mess”, he called on the insurance industry to join other business communities to “break through the sceptic and denier barrier and go supersonic”.
It’s a challenge the industry is already working on. In a report last month, Lloyd’s Chairman John Nelson noted that “understanding and incorporating climate change into future modelling has become essential for anyone making long-term financial commitments, be that investing in infrastructure, housing or indeed policy”.
“Ultimately, insurance exists to pick up the pieces and pay the claims when the likes of a Hurricane Katrina or a Superstorm Sandy strike,” he said. “But to continue to do this, insurers must factor climate change into modelling, and develop the tools we need to understand and evaluate its impact.”
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