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Risk managers need to be aware of how their organizations’ net-zero transition plans and impact on the environment are considered by insurers, a broking executive said during a thought leader session at the Risk & Insurance Management Society Inc.’s Riskworld conference Monday in Atlanta.
A large cohort of insurers have committed to having net-zero emissions in their underwriting portfolios by 2050, said Amy Barnes, London-based head of climate and sustainability strategy at Marsh LLC.
While several insurers have pulled out of the United Nation’s Net-Zero Insurance Alliance, many remain committed to having net zero emissions in their portfolio by the 2050 target and have said they will start reducing them significantly by 2030, Ms. Barnes said.
“Insurers who are part of the alliance have said that they will reduce carbon emissions in their underwriting footprint by between 36% and 60% by 2030. That is really material,” she said.
Insurers are going to start counting that information, Ms. Barnes said.
“Although you may have less input into how your business decarbonizes, it's a story that you need to know and need to understand because it's going to start to impact risk selection,” she said.
While initially companies in certain sectors such as oil and gas will be more impacted by insurers’ attention on climate transition plans, financial services companies could also be impacted, and “there’s an opportunity for risk managers to ensure they are engaged now,” she said.
The move by several insurers to pull out of the Net-Zero Insurance Alliance makes it slightly harder to navigate how insurers will implement their decarbonization plans, she said.
“Three weeks ago I could have told you the rules insurers were following. Now as insurers follow their own path, there could be some real advantages to that, but it’s going to be far harder for us to communicate to you exactly what the expectations are,” Ms. Barnes said.