RIMS Australasia 2021: Insurers to pull coverage due to climate concerns

Some industries could be left without insurance coverage as insurers pull capacity due to climate change concerns, advisory firm Willis Towers Watson has warned. 

Across Australasia, carbon-intensive sectors face being left without access to insurance capacity and financial capital as insurers withdraw capacity, according to the firm.

Speaking at the RIMS Australasia Conference 2021, Liz Lister of WTW said insurers were withdrawing underwriting from fossil fuel-intensive industries, with other sectors poised to be next on the chopping block.

Lister said insurers were “under pressure from investors” to act on climate change, and were “beginning to make decisions to protect themselves for the future”.

Although they had started looking at companies from a carbon perspective, this was likely to broaden to other industries that caused climate-related harm, she said.

Companies with high methane emissions could be next, Lister added.

Global insurers have begun to incorporate “robust ESG plans”, she said, and would look to be “stewards of the climate transition”.

Risk managers will feel the impact as insurers broaden their climate-focused approach, Lister said.

“This focus will cascade across multiple high carbon industries. The industries that could be impacted include marine, aviation, agriculture, steel cement, just to mention a few, so this could have a severe impact on you,” Lister told attendees.

“In some industries, we could be in a situation where there is no capacity for high carbon emitters. So this is something we do need to be thinking about now, so that you have robust plans to ensure that you’ve got a future ahead.”

“As a risk manager, you have a key part to play in mitigating this risk,” Lister added.

Willis Towers Watson’s Tony Rooke said risk managers would need to react to “pressure points” and help organisations towards low carbon, zero carbon and negative carbon business models.

Risk and opportunity identification would be important, Rooke said.

“Risk managers have a strategic role to play in plotting this because the past is not necessarily an accurate portrayal of the future. In fact, it won’t be. We will see wholesale changes across markets in insurance, but also across most industries, particularly the high carbon ones, many of them at the heart of our economic development.”

Rooke added that companies would need to manage their resilience to changing risks, regulatory pressure, capital withdrawing from markets, and public and social pressure, in the years to come.