Insurers urged to offer cover for carbon markets

Insurance companies should be doing more to exploit the opportunities presented by climate change through the development of new products such as cover for carbon markets and rainforests.

This is the conclusion of a new report on the environmental credentials of the UK insurance industry published today, which claims that the sector should be doing more to support climate change mitigation efforts.

Alice Chapple, report author and director of sustainable financial markets at Forum for the Future, said insurers have a key role to play in ensuring new clean technologies and carbon emission reduction initiatives are successful.

"Many schemes set up to tackle climate change are vulnerable, especially in developing countries, and firms should be offering products to spread that risk, " she explained.

The report assessed the 41 insurance firms who have signed up to the ClimateWise initiative, a coalition designed to help co-ordinate the sector's response to climate change.

It found that fewer than half the members of the group had reported on the progress they are making with incorporating climate change into their investment strategies or how they assess its impacts on company performance and shareholder value.

Moreover, despite widespread acceptance that climate change risks, such as the increased frequency of severe weather events and rising sea levels, will pose a major threat to property and businesses, many insurers are still not considering climate change risks when developing corporate insurance policies.

"Insurance companies should ask for evidence of corporate strategies to assess and manage climate change risk [from corporate clients] when writing and pricing liability policies," says the report.

Chapple added that insurers should also factor in the risk that carbon-intensive firms could find themselves the target of mass legal action over climate change in a similar manner to the tobacco industry.

The report was also critical of insurers' internal emission reduction programmes, noting that four out of 10 ClimateWise members have no formal emissions targets, and only half are encouraging their suppliers to improve sustainability.

However, despite these failings, the report found that the industry is beginning to lay the groundwork for a more co-ordinated response to climate change.

It suggested that research into the dangers of climate change is playing an important part in public policy making, while half of insurers have designed products or services to help customers reduce their carbon emissions.