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The California Department of Insurance and the United Nations Environment Program are working to develop a sustainable insurance roadmap to address wildfire and other climate risks in the state.
The roadmap aims to pave the way for innovative risk management, insurance and investment solutions that reduce climate risks and protect natural ecosystems, according to a statement released by the department on Wednesday. For example, new insurance products could be developed to promote cooler streets and renewable energy. The initiative will engage insurers and reinsurers, public policy leaders, environmental NGOs, researchers and risk management experts.
In other countries, insurance solutions for coral reefs and mangroves are emerging as these natural ecosystems have been proven to significantly reduce wave energy and buffer storm surge, reducing flood risk and protecting communities, the statement noted. In this vein, insurance solutions for California’s natural infrastructure such as wetlands and forests could reduce climate and disaster risk.
The yearlong effort is the first time the United Nations has partnered with a U.S. state to create a sustainable insurance strategy and action plan that would tackle the growing risks of climate change. In 2018, California experienced the deadliest and most destructive wildfires in the state’s history, resulting in more than $12 billion in insured losses, according to the department.
“We have a historic opportunity to utilize insurance markets to protect Californians from the threat of climate change, including rising sea levels, extreme heat and wildfires,” California Insurance Commissioner Ricardo Lara said in the statement. “Working with the United Nations, we can keep California at the forefront of reducing risks while promoting sustainable investments.”
“A sustainable insurance roadmap will enable California to harness risk reduction measures, insurance solutions and investments by the insurance industry in order to build safer, disaster-resilient communities and accelerate the transition to a low-carbon, sustainable economy,” Butch Bacani, who leads U.N. Environment’s Principles for Sustainable Insurance, said in the statement.
The department was one of the first insurance regulatory and supervisory authorities in the world to sign the U.N. Environment’s Principles for Sustainable Insurance and commit to tackling global sustainability challenges such as climate change, biodiversity loss and ecosystem degradation, pollution and social and financial exclusion.
The department also launched the Climate Risk Carbon Initiative, which tracks fossil fuel-related securities in insurers’ investment portfolios, under former California Insurance Commissioner Dave Jones in January 2016.
Insured wildfire losses in California could be approaching record levels, according to a briefing Wednesday from A.M. Best Co. Inc.