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Insurers urge use of market incentives to address climate change and call for clear frameworks for private sector involvement

Buenos Aires/Nairobi, 3 November 1998 - Insurance executives, speaking on behalf of about 80 insurers from around the world, will address climate change negotiators here in Buenos Aires and urge for feasible and applicable market incentives to reverse the current trends in climate change. With annual revenues of over US$2 trillion, the concerns of the insurance industry will be hard to ignore.

The insurance industry has suffered from a series of "billion dollar" storms since 1987. This has led to a strong increase in claims. Property insurance is particularly affected, while changes in human health may affect the life insurance and pension industries.

"Insurers know from experience how expensive it can be when people fail to protect themselves adequately from risks and do not take preventive measures where those are possible and necessary," said Klaus Toepfer, Executive Director of the United Nations Environment Programme (UNEP), which is working closely with the industry on a number of climate change related initiatives. "Being involved in the discussions here in Buenos Aires simply makes good economic sense," he said.

The insurance executives will present an executive summary of a report to the Fourth Conference of the Parties to the United Nations Convention on Climate Change highlighting the industry's concerns. The report assesses the implications of last year's Kyoto Protocol and its mechanisms, which, say the executives, will need to be adequately defined in order to attract private sector involvement.

The insurance industry is particularly concerned that should negotiations fail to provide clear guidance on how to make the three Kyoto mechanisms workable, private sector involvement could be very limited. A whole set of issues, say the executives, need to be clarified before financial services providers would feel that they are attractive to businesses.

The report is written to both inform the insurance industry and the policy- and decision-makers about the implications of the Kyoto Protocol on business activities in the coming century. The key areas covered are:

 

  • An overview of the potential impacts that climate change may have on the insurance sector.
  • An overview of potential opportunities that the Protocol presents to the insurance sector, both in terms of current practices (underwriting and investments) and future new products that may be created in light of climate change impacts.

In their report, the insurers also point out that climate change has potentially large implications for investment activities. As governments, investors, and consumers anticipate and try to adapt to a new climate regime, some products and services will become less attractive, while others become more so.

The insurance sector also calls for the creation of acceptable reporting standards for industries and has proposed a CO2 Indicator under the auspices of the UNEP Insurance Industry Initiative on Sustainable Development and the Environment.

The UNEP Insurance Industry Initiative was launched when insurers signed the UNEP Statement of Environmental Commitment by the Insurance Industry in 1995. The Statement commits its signatories to incorporate environmental considerations into their operations and to adopt best practices. The Financial Institutions Initiative was launched in 1992 during the "Earth Summit" in Rio de Janeiro, initially by 30 commercial banks from all over the world and has now grown to over 115 members.

The insurance sector also collaborates on metrics with the World Business Council for Sustainable Development and the UNEP Financial Institutions Initiative, where banks are involved.

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For more information or to arrange interviews, contact
Robert Bisset,
UNEP Press Officer
tel/fax: (54-1)-314 1400, mobile: 15-4166147,
email: rbisset@rocketmail.com

In Geneva, contact:
Mr. Hussein Abaza,
Chief UNEP Economics,
Trade and Environment Unit,
tel: +41-22-979-9179, fax: +41-22-796-9240,
email: abazah@unep.ch
or
Mr. Aiko Bode,
UNEP Co-ordinator
UNEP Insurance Industry Initiative,
tel: +41-22-979-9197, fax: +41-22-796-9240,
email: aiko.bode@unep.ch
or
Mr. Mike Kelly,
UNEP Co-ordinator
UNEP Financial 44 Institutions Initiative,
tel: +41-22-979-9288, fax: +41-22-796-9240,
email: mike.kelly@unep.ch

UNEP News Release 1998/114

Wednesday 04 Nov 1998
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