The journey to net zero - An insurer’s guide to navigating climate risks and opportunities

Tim Antonelli, CFA, FRM, SCR, Multi-Asset Strategist, Wellington Management
Adhiraj Maitra, Director, Insurance Climate Risk, Willis Towers Watson
Yingzhen Chuang, Deputy Head of International Catastrophe Analytics, Willis Towers Watson

For as long as weather and natural catastrophe models have existed, insurers and reinsurers have been responsible for the commercial assessment of natural disasters, primarily through underwriting and reserves management. Today, amid increasingly devastating consequences and rapidly rising costs of climate-related perils, (re)insurers are expected to play a larger role in helping society mitigate the effects of climate change, build resilience to its effects and support the transition to a low-carbon economy.

(Re)insurers have an opportunity to lead on these issues, building on their deep knowledge of physical risk, and strengthen their position in the marketplace by taking an enterprise-wide approach to climate change. Climate change is going to impact different parts of the business and hence it is important to take a holistic view of the business.

By understanding and managing climate risks on the assets and liabilities sides of the balance sheet and advancing climate-awareness in their own organizations, insurers can effectively navigate climate change. The increasing volatility of loss-causing climate-related events along with growing financial risks to assets in investment portfolios present a dual threat. However, climate uncertainty and the wide range of outcomes associated with climate change also present opportunities to develop a sustainable, progressive and commercially successful strategy for the business.