Page 24 - Insurance Times March 2023

To stay sustainable:

the insurance

industry needs an

urgent paradigm Praveen Gupta

Continues to pursue his passion of exploring, learning
and sharing from the exciting inter-sections between
shift! Climate Crisis, Diversity, Governance, Risk and Tech. He
essays his passionate views through his blog:
www.thediversityblog.com.

The current performance metric has outlived its utility - the way risks manifest, impact, get
measured, priced, reported, regulated - all changes. With these threats come some of the biggest
business opportunities.

Introduction Here is a stark reminder from my friend - renowned
conservationist Bittu Sahgal: "My generation has left you a
Extracting the #insurance industry out of its comfort zone -
world with fewer choices and greater risks. But it's still a
the business as usual (BAU) mode and its silos - but for much
beautiful planet…".
of Europe remains a major challenge. The inertia percolates
from top down. The International Association of Insurance
As global temperatures keep rising above the pre-industrial
Supervisors (IAIS) has 'outsourced' the climate challenge to
times, the stability that we took for granted is in a state of
the UNEP FI. As the climate jargon swells on a daily basis;
flux and headed for irreversible consequences. This is thanks
#CO2 levels, #pollution and #biodiversity losses compound -
to the over-exploitation of Nature - resulting in Climate
the only assured outcome is tipping point for
Change together with biodiversity loss and pollution. Munich
#planetaryboundaries.
Re sees climate change and La Niña as two of the drivers for
With global temperatures rising, more and more of what can a US $120 billion annual disaster insured loss for 2022.US
be insured becomes uninsurable. As risk carriers - insurers $100 billion or more is the "new normal" for the global
are also investors in physical assets (predominantly but not insurance industry's annual natural disaster loss total.
exclusively fossil fuels) face transition risk thereby likely to
Insurers have a critical role in mitigation, adaptation and
become stranded assets. Dreaming of profitable growth and
delighting the customer - with this backdrop - will be a mirage. resilience. To stay sustainable they must, therefore, respond
to the emerging order urgently. The current performance
I am thankful to the General Insurance Council of India for metric has outlived its utility - the way risks manifest, impact,
inviting me to pen a 'short piece' on the subject, for its maiden get measured, priced, reported, regulated - all changes. With
newsletter. Sincerely hoping that the messaging howsoever these threats come some of the biggest business
simplistic - will not fall on deaf ears. That India's economy must opportunities.
pursue a decarbonised trajectory is a foregone conclusion. The
urgency is compelling if we must attain resilience to face Causa Proxima: Conventional risk silos demand urgent revisit.
existential climate threats - unleashed by our actions. Climate risks manifest as physical, transition and liability risks.

20 March 2023 The Insurance Times