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Cambridge Institute for Sustainability Leadership (CISL)

Net zero underwriting

20 December 2021 - Bronwyn Clare, Senior Programme Manager at CISL, argues that partnership between an insurer and their clients on net zero aligned underwriting is critical to a smooth net zero transition for both.

In 2017 AXA warned a 4-degree rise in global temperature would make the world uninsurable. A lot has happened since then that has greatly improved our understanding of the acceleration in climate change impacts and the need for urgent action. And while COP26 delivered a leap forward in the acknowledgement that more needs to be done faster, it didn’t sufficiently fill in the gaps about how to get there, how to maximise the changes available to us now or the preparations needed for us to cope in a warming world.

When governments and decisionmakers look for answers, their first call may not be to the insurance industry, and when individuals consider climate positive behaviours it may not be through their insurance policies. And yet no other industry has a better skillset for understanding the probability and cost of climate disaster. And perhaps no other industry has such a soberingly clear insight into what they have to lose as the climate warms.

Research from CISL launched at COP26 explored how the expertise of the insurance industry can be scaled up to support the global transition to net zero. The findings lay out three ways to plan ahead to cover the cost of a disaster: government protection through taxes such as those paying for hospitals, police and fire fighters; insurance policies; and the savings of individuals and communities and sharing with those in need. And it is forward planning that is critical in reducing the cost of a climate-related event or disaster.

Here is where we get back to the details of working with insurance and its skills in understanding, measuring and managing climate risk. That risk includes both the physical impacts from events such as floods and fire, and also the transition risks as business and government move to a low carbon economy.

While most people rarely consider the small print of their home or car insurance policy, or business policy, the coverage, terms and pricing will be shifting. The questions on a policy application or renewal, or from a broker, will be changing to recognise the location, nature of the assets and the types of insurance being sought. Is your property on a flood plain? How is your building’s energy efficiency? Have you considered how changing transport patterns and costs, energy efficiency of your products or the waste to be processed will alter with the low carbon economy?

The UK is mandating business transition plans, and these could alter insurance availability and cost, leading to more serious difficulties with business’s customers, or individual’s banks and investors. If your insurer won’t back you, who else will?

A partnership between an insurer and their clients on net zero aligned underwriting is critical to a smooth net zero transition for both, and the economy. A new report from ClimateWise unpacks net zero for insurance underwriting and the potential ways for insurers to prioritise client engagement by sector and lines of business. It goes on to test current tools available for insurers to understand alignment of their underwriting portfolio and clients to net zero.

While a key finding is the need for capacity building by insurers and clients, the guidance is clear to mainstream basic climate risk knowledge within an insurer, attempt to measure insured emissions and improve the metrics as we go, and for clients to prepare to be checked and held to account for their transition plans.

With a 4-degree world seen as uninsurable, the industry has many reasons to align its businesses and clients with the Paris agreement and it has to start now

Read the ClimateWise report Insurers in Paris-aligned climate transition: Practical actions towards net zero underwriting.

About the author


Dr Bronwyn Claire is Senior Programme Manager for ClimateWise at the Cambridge Institute for Sustainability Leadership. She joins CISL from KPMG, where she spent 7 years working with insurance companies and banks in Australia and Hong Kong to improve risk management and internal controls.


Staff articles on the blog do not necessarily represent the views of, or endorsement by, the Institute or the wider University of Cambridge.


Zoe Kalus, Head of Media  

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