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Cambridge Institute for Sustainability Leadership (CISL)

30 June 2021 – The University of Cambridge Institute for Sustainability Leadership’s (CISL) ClimateWise initiative has published a new white paper on climate product innovation.

Click here to download the paper.

This paper explores the critical role of the insurance underwriting in enabling the transition of the wider economy towards decarbonisation. Opportunities to incentivise climate mitigation and support the growth of low carbon solutions exist in the design and pricing of policies, claims and the provision of risk advisory services.

The industry needs to rapidly lean in to meet the existing risk transfer and advisory needs of clients’ decarbonisation pathways, to anticipate their evolving demands and needs and and incentivise their transition.

To accelerate the industry’s response, this white paper represents an initial contribution from ClimateWise. The paper highlights the current market state and further aspects for development across nine key opportunity areas for insurance product innovation to support climate mitigation, with a focus on commercial lines that will drive the transition: 

  1. Enabling and incentivising low carbon choices 
  2. Mainstreaming the encouragement of climate mitigation through efficient and resilient reinstatement 
  3. Implementing environmentally sustainable claims servicing 
  4. Enabling capital flows towards green solutions through risk transfer solutions  
  5. Creating removal-based carbon offsets through natural capital protection 
  6. Scaling emerging and existing low carbon and net-negative technologies and start-ups 
  7. Supporting the sustainable decommissioning of carbon-intensive assets 
  8. Developing risk advisory services to support clients’ climate mitigation understanding and approach 
  9. Developing solutions for increasing climate legal liability and environmental litigation 

Related to the nine key priority areas for the sector, ClimateWise proposes further recommendations to address barriers to innovation and foster greater collaboration across and beyond the insurance value chain. The following seven actions are highlighted to enable and speed-up climate product innovation:    

  1. Actively engage with government on transition protection needs and private-public partnership opportunities to facilitate blended-finance approaches to scaling risk-transfer capital, such as through state-backed reinsurance pools.
  2. Upskill to enhance an ‘engineering’ approach to underwriting, building on close relationships with technology developers of all sizes.
  3. Coordinate across the insurance value-chain across brokers, insurers and others to reduce duplication through a common industry framework that recognises the unique role each player should address to achieve net zero.
  4. Drive ‘long-termism’ through a culture that incentivises innovation and works to reduce barriers that tend to embed static business-models.
  5. Enhance structuring of existing climate data and development of key climate models, bringing together model-vendors, in-house analytics teams, and original equipment manufacturers (OEMs) to access key data sources and advise on best practice.
  6. Innovate product structures and new insurance offerings that are aligned to client needs, ensuring clients and customers are aware of how newer products and structures, such as usage-based products or parametrics, can benefit them.
  7. Align insurance solutions with insurers commercial and climate objectives so growth areas, such as IP insurance or risk consulting, appropriately integrate climate considerations in ways that enable additional innovation.

The report was written in collaboration with Deloitte and Icebreaker One, and builds on previous research by ClimateWise examining policy opportunities to support net zero underwriting.  

Commenting on the release of the new paper, Dominic Christian, ClimateWise Chair, Global Chairman Reinsurance Solutions, Aon, said:

“ClimateWise members seek to be at the forefront of product innovation that drives and enables the transition to net zero and we hope this new white paper will lead the way for greater collaboration within our industry and with external decisionmakers to support the urgent need to tackle climate change.”

Read more comments from our co-authors and members.

Citing this report

Please refer to this report as: Cambridge Institute for Sustainability Leadership (CISL). (2021). Climate product innovation within the insurance sector. Cambridge, UK: Cambridge Institute for Sustainability Leadership.


Click here to download the paper.

Find out more about ClimateWise.

Published June 2021

Authors and acknowledgements

The lead authors of this report were Deloitte’s Neal Baumann, David Rush, Andy Masters, Katherine Lampen, Greg Lowe, Tasha Clarbour, Margaret Doyle, Peter Evans and Rosie Woodall, Icebreaker One’s Jannah Patchay, and Willis Towers Watson’s Lucy Stanbrough.

The study design and editorial process was led by Rachel Austin and Bronwyn Claire.

The authors would like to thank colleagues from participating organisations at: Aon, Argo Group, Axa XL, Beazley, Brit Insurance, Ki, Howden Group, Lloyd’s of London, Munich RE, QBE, and Tokio Marine & Nichido Fire for their invaluable contributions.


The opinions expressed here are those of the authors and do not represent an official position of CISL, the University of Cambridge, or any of its individual business partners or clients. This report is not, and should not be construed as, financial advice.