Zurich Says Insurers Must Step-Up On Climate Change

NU Online News Service, Sept. 4, 11:55 a.m. EDT

Zurich Financial Services Group is calling upon the insurance industry to use its resources and risk management expertise to respond to the challenges presented by climate change.

In a report issued this week–"The Climate Risk Challenge: The role of insurance in pricing climate-related risks"–Zurich said that "given the exceptional complexity of the climate risk challenge, the core insurance mechanisms of underwriting, claims management and asset management can play a central role in dealing with climate change."

In the 10-page report, Zurich cites a strong need to create a structure of sustainable, market-friendly incentives for climate risk adaptation and mitigation, while contending that insurers–whose core expertise is managing the balance between risk exposure and financial stability–are in an ideal position to suggest how this can be done effectively.

The report concludes that for insurers, the most important concepts for any public policy response related to climate change are:

o Terms and conditions of the policy response must continue to allow insurers to use their core skills to send risk-based price signals and manage risks.

o Climate policy must close the global governance gap, including provisions that allow for the quick and efficient resolution of situations involving a conflict of laws, both within and between sovereign jurisdictions.

o Climate policy must enable markets to function properly. To do so, public policymakers must properly assign property rights, and where they cannot be assigned because the property in question is a public good, governments must align incentives to reflect the goals of climate policy.

o Climate policy must recognize the regional nature of climate change and the resulting intersection of energy, water and carbon risk management strategies.

Copies of the report are available at www.zurich.com.