Green Economy! Is the Insurance Industry Ready?

Green Economy aims to reduce environmental risk and improve economic sustainability in terms of low carbon, resources efficiency and social inclusiveness. This undoubtedly is as a result of climate change and its impact on the economy. The devastating effect of climate change is evident in rainfalls, extreme heat, deforestation, carbon emissions, melting of glaciers etc. The call to mitigate the effect of climate change will invariably affect business and the associated risks. Is the insurance industry ready? 

Insurance as a risk management tool will have to adapt to the green economy needs to enable it play beyond the business of risk transfer and risk mitigation. In fact, the industry’s relevance should be beyond just pricing and transferring risk but changing outcomes. Insurers should work with clients on adapting to climate change. That means increasing resilience of their infrastructures, facilities, or supply chains. Technical insurance capabilities will need to evolve to meet the changing needs. 

Underwriting clearly should be responsive to the green economy as new hazards will emerge, requiring new products and new underwriting solutions. Traditional underwriting models will no longer be predictive of the future as well as obligations will change, requiring new techniques for portfolio management. 

Green economy points to the likely investment destinations and therefore influencing reporting and disclosures. 

These developments will determine the markets and its implication on portfolio management either to operate in a particular market or exit due to vulnerabilities. Insurers and Regulators would have to be alerted to redirect capital to make the business profitable. Thus, the insurance industry can play a critical role in helping stakeholders manage risk in the Green Economy 



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