Energy tri-lemma ‘illustrates complexity of net zero transition’ for risk carriers

“Transitioning to net zero is difficult, of that there’s no doubt, and we see this happening in practice. And transitioning to net zero, while the climate is already changing, is even harder. It’s really important to recognise that.”

That was the view of Swenja Surminski (pictured), managing director, Climate and Sustainability at Marsh McLennan, as she gave her keynote speech titled ‘A c-level perspective on accelerating climate risk management’, at Intelligent Insurer’s Climate Risk and Sustainability in Re/insurance Europe conference, in London.

Giving an example of how difficult this transition process is, she pointed to the current energy ‘tri-lemma’, which is a term Marsh McLennan has framed during its work with the World Energy Council.

“What we've seen over the last two years is that energy tri-lemma playing out, so energy security, equity in terms of affordability, and sustainability.

“Ideally, we want it all, but we can also see, at least in the short term, the trade off. We see the link to the challenges from a changing climate and the challenge to the energy system, and [the question of] how can we actually make the transition resilient?”

However, she told delegates, while the issues around climate risk are complex and interrelated, the re/insurance industry has “both very good insights and capabilities” to tackle such challenges. For example, with investments that could help rebalance the climate risk approach towards more proactive risk reduction and preparedness. Although she admitted that it was “a tall order”.

She also flagged up the long-term engagement the industry has had in this area as she referenced a report on flood risk and climate change from Munich Re published in1978, as well as a Swiss Re publication titled ‘Climatic change in the insurance industry, still a critical issue’ published in 1996.

“I'm not saying this in terms of ‘wow, it’s great for them to have had all that knowledge!’, I’m saying it to remind us that it's not a new topic. And I think that the challenge that we still face is to translate this knowledge into solutions both on the transition and the resilience side.”

Surminski said there are already examples where that vision of a resilience focused insurance industry is at play, such as Flood Re in the UK with their ‘Building back better’ scheme.

“If we have to address resilience, if we have to address change, what we can't do is put things back to where they were before. At that moment when there is a loss, we have to consider changing to increase resilience.”

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