The potential economic and environmental impact of climate change is by far the most serious long-term threat facing clients of the (re)insurance sector, according to Aon’s Richard Dudley, who urged the industry to embrace the opportunity presented by the global transition to net zero.

Richard Dudley Aon

Speaking at the Risk Mitigation Forum on Wednesday, hosted by RenaissanceRe in partnership with ClimateWise, Aon’s global head of climate strategy said the (re)insurance market had a “colossal” opportunity to create value-added products which enable and promote the transition to net zero.

But Dudley noted that the industry needs to do a better job in promoting its capabilities, adding that some may see the sector’s withdrawal of cover from carbon-intensive industries as being counter-productive.

He pointed to a recent trend within the (re)insurance sector which is seeing some carriers exit carbon-intensive areas of underwriting or investment as a way to support the global transition to net zero by 2050.

Dudley said such actions are unlikely to support transition of the global economy to net zero. He stressed that the industry should be engaging with hard to abate sectors to accelerate transition, not excluding them on arbitrary timescales. He warned the (re)insurance sector is also not moving quickly enough into new opportunities, such as the development of cover for emerging risks or new investments in areas such as carbon capture.

“This is challenging for us, because the industry seems to be quickly saying ‘no’ to certain things but is much slower in saying ‘yes’ to new things,” he told attendees at the conference in London.

“That’s a challenge for the relevance of our industry and raises the question as to whether or not we can execute on the real scope of some of the opportunities which present themselves from transition. The opportunity for us as an industry is colossal.”

Cathal Carr and Richard Dudley

Photo: Daniel Jones Photography

Dudley added that carriers are witnessing first-hand the impacts of climate change through natural catastrophe events and said it was “understandable” that (re)insurers were focused on preserving capital, rethinking risk appetites and reserves for risks which are rapidly changing.

However, Dudley said the sector should do more to promote its offering to clients – and the broader economy – who may be unaware of the sector’s climate leadership or of the innovative risk transfer products being developed to help drive the transition to net zero.  

“A lot of the clients that I have been speaking to over the past 12 months and a lot of the senior people within our major corporate clients globally, their view of the (re)insurance industry is that it is reducing the availability of existing coverage, and that it hasn’t moved anywhere near quick enough to help them in their own transition,” he said during the 16th Forum RenaissanceRe has hosted as part of its Risk Mitigation series. 

“That’s a vast generalisation and we know from within the industry about the great product innovation that is happening … but that is nowhere near visible enough to the real economy.”

This view was shared by Cathal Carr, senior vice president and global head of climate and sustainability strategy at RenaissanceRe.

Carr noted that the (re)insurance industry is recognising that climate change represents an opportunity for it to create financial value while also having a profound social and environmental impact.

“These elements are not mutually exclusive,” Carr told the conference. “The impact we can have here is extremely positive,” he said.

Over the next few days The Insurer will be publishing more content from the event, including video highlights and interviews with Carr, Dr Nina Seega, research director at the Cambridge Institute for Sustainability Leadership, Jeff Manson, SVP underwriting and head of global public sector partnership at RenaissanceRe, and Fiona Walden, global head of credit at RenaissanceRe.