The insurance industry’s profile at COP26 will be significantly higher than at previous UN climate talks as finance increasingly takes centre stage in discussions.
While the political discourse will likely drive many of the headlines to emerge from the event – particularly around government commitments on emissions reductions – the industry is set to unveil a raft of initiatives over the coming two weeks.
The insurance-related headlines that emerge will likely be dominated by two key themes: measures to address transition risk and the role that insurance can play in helping address adaptation in the most vulnerable countries.
As part of the focus on transition risk, there will be considerable focus on the measures companies can take to start to better understand the carbon footprints of their portfolios.
The UN-convened Net-Zero Insurance Alliance (NZIA), which added Lloyd’s as a member on the eve of COP26, is already working with the Partnership for Carbon Accounting Financials on measures related to this theme.
On Wednesday 3 November, the COP26 Finance Day, the NZIA will share key approaches for insurers to decarbonise their underwriting portfolios, with billed speakers including senior representatives from across NZIA’s membership.
Willis Towers Watson (WTW) is expected to formally launch its Climate Transition Index at the event, which provides investors with a framework that can quantify and incorporate the financial impact of climate risk. A fund that tracks the index is expected to be unveiled in Glasgow, with a substantial commitment expected to be in the region of $1bn.
The broker also launched its Climate Transition Pathway framework earlier this year, which has already attracted Liberty Specialty Markets and Scor as signatories. The framework uses a series of metrics to determine a company’s progress in transitioning towards decarbonisation, with companies achieving accreditation under the framework able to access insurance capacity from participating carriers.
Speaking in the run-up to COP26, Rowan Douglas, who heads up the climate and resilience hub at WTW, said the event will likely be remembered as the moment “the mainstream financial markets, as well as the wider economy, said this is the beginning of the end of the fossil fuel economy”.
“Glasgow will see a much stronger presence from mainstream finance. The political element has created the context but we have now entered another chapter. My recommendation is not to be distracted by the broader political discourse. Business is already making this move, and it will be amplified in Glasgow.”
The industry-backed Insurance Development Forum is expected to unveil a series of initiatives at the event, including a risk and resilience analytics partnership launched in collaboration with the Vulnerable 20 (V20) ministers of finance.
The V20 will also use COP26 to formally launch its Sustainable Insurance Facility, a mechanism that will reduce pressure on public spending in the aftermath of disasters through the creation of climate-smart insurance for micro, small and medium-sized enterprises in vulnerable countries.
The Insurer will provide detailed coverage of these and other initiatives unveiled during the next two weeks of COP26 discussions.