De-risking climate: insurers debate varied responses in EAIC panel

Insurers can take action to ease the impacts of climate change by focusing on mitigation and adaptation and working with governments, panellists told delegates at the East Asian Insurance Congress (EAIC) in Hong Kong this week.

In a panel discussion titled “De-risking climate change and advancing sustainability: Turning promises into action”, Lubomir Varbanov, managing director and Asia-Pacific head of public sector solutions at Swiss Re, said climate change had put the world into a “polycrisis” that needed a complex response.

The phrase “polycrisis” refers a cluster of related global risks with compounding effects, such that the overall impact exceeds the sum of the parts. It is a term first coined by the World Economic Forum last year after it stated “a new descriptor to define the scale of the problems the world is facing” was needed.

“It is a challenging balance on a variety of axes,” Varbanov said. “Much of the public discourse has been focused on mitigation but some climate change has taken place and alongside mitigation we need to focus on adaptation.”

“For individual customers and companies, the understanding of climate change is very low.”

He said such measures would be in the spotlight at the upcoming COP29—the UN Climate Change Conference—in Baku, Azerbaijan. The challenge, Varbanov said, was “how we can continue to live comfortably in a world that is warmer and amid more extreme weather events”.

Christopher Hui, Hong Kong’s secretary for financial services and the treasury, said the territory would try to offset climate change with its long-term goal of carbon neutrality by 2050. “We are prepared in terms of increasing natural disasters but have to prepare certain sectors.” Hong Kong has pledged to end the use of coal in its power sector by 2035.

Insurers on the panel said they were focusing on sustainability and affordability. “Every time we have nat cat losses, that creates pressures inside our capital arrangement,” said Eric Hui, chief executive of Zurich Insurance (Hong Kong). “We need affordable pricing—that’s the most important question.”

Chelsea Jiang, chief technical and innovation officer for Greater China general insurance at AXA General Insurance Hong Kong, said adaptation and education were the biggest challenges. 

“We understand the geography of the territories but for individual customers and companies, the understanding of climate change is very low.

“I doubt that clients understand what their future holds,” she said. 

“The challenge is to bring understanding to customers about the risks they face and how they will change, so they can focus on the measures they should take and we can provide sustainable premiums.”

Pragmatism needed

Christopher Hui said discussions about climate change needed to be pragmatic. “How insurance can play a role is ultimately about cost, about money,” he said.

Hong Kong for example, had tried to become “more forward-looking” and support more “green” projects. Hui noted that a number of green bonds had been issued since 2018, including almost HK$4 billion this year. The most recent were used to fund the Kai Tak Sports Park, which will have a capacity of 50,000 people and be one of the largest event arenas in the region. “We have a stake in the game,” said Hui.

Eric Hui said Zurich’s “tremendous investment portfolio” influenced how the industry would become greener. “We have a target to set aside money for environmental, social, and corporate governance funds, and we have a target of decreasing greenhouse gas emissions from our portfolio by 45 percent by 2025.”

Jiang said AXA was in discussions with reinsurance partners around the capacity available for coverage of nat cat and climate-related events. “AXA has been invested in looking into risk-sharing,” she said. “It’s a journey. We have a lot to learn.”

For more news from the East Asian Insurance Congress conference (EAIC) click here.

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