Roles of the insurance value chain on innovating for net zero
Innovation around climate mitigation, which is a sub-set of broader innovation across the insurance
industry, has been rapidly climbing the agenda. The past year has seen announcements from across the
value chain committing to net zero, including the launch of new net zero industry initiatives, such as the
Net Zero Insurance Alliance.
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The industry’s role in developing new products and services to support the transition and adapting existing
ones demands action from each part of the insurance value chain:
• Brokers – understanding the client challenges and demands, their specific transition risks and risk
transfer or wider risk service needs, co-developing products with insurers to meet current and evolving
demand and most importantly, using their network to increase penetration for existing products and
services that support net zero and raising awareness of these risk transfer and advisory solutions. As
aggregators of risks across industries, brokers are in a unique position to create facilities that can
‘crowd in’ the insurance capital needed to scale the transition. For example, the London and
International Insurance Brokers Association (LIIBA) has recently published a paper on the role of
brokers in the industry’s push towards net-zero.
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As one of the largest brokers, Aon committed to
net-zero carbon emissions by 2030 in March 2021.
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• Insurers – innovating underwriting, products and claims and wider risk advisory services required to
enable the transition and support the scaling of low carbon solutions. Innovation in risk transfer
solutions is required to enable, drive and accelerate the wider economy’s transition. Leveraging and
commercialising insurers’ adjacent risk advisory services are also important to clients’ climate
mitigation understanding and approach. Aviva became the first major insurer worldwide to target net
zero carbon by 2040 in March 2021.
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• Reinsurers – supporting direct writers, i.e. insurers, to develop and scale innovations, primarily
through the provision of reinsurance capacity and risk expertise, reinsurance creates stability through
the transition, and enables sustainable economic growth. Given their position in the value chain, they
have a uniquely broad view of transitional climate risk. Swiss Re committed to ambitious carbon
reduction targets across its investment portfolio, and net zero greenhouse gas emissions by 2050.
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• Modellers and model-vendors – given the complexity and interconnectedness of the transitional
climate risk landscape, risk modellers and model vendors are critical in the provision of increasingly
sophisticated multi-vulnerability models and analytics. These enable the provision of forward-looking
forecasts of climate risks, leveraging latest developments in data, modelling, machine learning and AI
tools.
• Loss adjustors – confirming the claim circumstances, the extent of any damage caused, and
assessment of claims coverage by policies, including claims pay-out. Loss adjustors have a role to play
in leveraging the claims process to incentivise and improve the environmental sustainability of any
repair and reinstatement. As claims emerge in relation to emerging low carbon technologies, evolving
skillsets are required to investigate, research and predict the frequency of claims.
• Legal firms – against the backdrop of rising regulation around climate change, whether linked to
legislated net zero commitments, industry or environmental legislation, or the litigious environment
and precedent, the risk and complexity in potential litigation and liability risks increases. Legal firms
play an important role in advising on litigation risks, including liability under financial services
regulations, corporate law, financial disclosures, risk management, directors’ duties, environmental
law and helping to identify opportunities for growth linked to the legislative landscape.