Christian Thimann, AXA's Head of Strategy, Sustainability and Public Affairs, explains how insurers can contribute to managing climate risks:
The latest scientific findings have reinforced the message of global warming. A 2°C temperature increase, the commonly accepted limit beyond which unforeseeable consequences on the environment cannot be excluded is becoming increasingly likely. It is clear today that the impacts of climate change are happening now and that they are global.
Climate change directly impacts the weather system and is associated with extreme natural events such as storms, floods, hurricanes/typhoons, droughts, and other climate risks. Over the past 50 years, the frequency of climate-related natural disasters was multiplied by more than 5 and the cost for the society was multiplied by more than 10. Intensified development in highly exposed regions, combined with the increasingly material effects of climate change, is behind this rise. More broadly, the overall cost of the risks associated with climate change has been estimated at 5% of global gross domestic product (GDP); this rises to as high as 20% of GDP when indirect impacts are included.
The indirect impacts of climate change on human systems encompass multiple risks for the economy, society, health, migrations, and geopolitics. As an example, the spread of disease is closely related to climatic conditions; as weather variations become more unpredictable, so does the impact of pandemics. Similarly, climate change could trigger growing population movements within and across borders due to extreme weather events or changes in weather patterns, sea-level rise, and environmental degradation, all of which in turn impact food security.
As part of the global safety net behind the world's economy, and as some of the world's largest investors, insurance companies, across all lines of business (health, life, property) will be on the front line when it comes to the economic consequences of climate risk. Therefore, the sector has a role to play in anticipating and mitigating these risks.
As an industry leader, AXA has a responsibility to leverage its expertise and take action to reduce climate risks
Insurance companies are in a privileged position to enhance knowledge on climate risks in order to better understand and tackle climate change.