Time for insurers to lean in to transition and support greening of global economy

EY’s Isabelle Santenac highlights how insurers can be enablers of the transition to a low-carbon economy…

The insurance industry is uniquely positioned to facilitate and accelerate clients’ transition towards a more sustainable, greener future. There is also a commercial imperative for insurers to act, benefiting from greater commercial opportunities, driving customer retention and enhancing their reputation.

Transition creates opportunities for innovative growth across existing sectors, including high-carbon sectors seeking to employ new technologies to rapidly transition, and new sectors driving climate-positive solutions. To support clients’ transition to a low-carbon economy, insurers will need to employ strategies beyond the scope of traditional underwriting. Insurers can take tangible steps now to enhance their capabilities and support clients’ transition in three key areas: coverage and product innovation, cross-industry collaboration and advisory through becoming a transition partner to clients.

The innovative nature of new green solutions often leads to new risk profiles. This creates an immediate need for product innovation and green technology solutions, utilising the insurance industry’s deep cross-sector expertise. Insurers are already supporting new green industries and infrastructure, such as renewable energy and onshore wind farms with warranty and services contracts. The shift towards using more sustainable materials, new construction methods and alternative energy will further increase demand for new products. To meet this demand, insurers must understand the transition pathways of critical sectors and develop their product offerings beyond what is available today to help remove barriers to transition.

“To support clients’ transition to a low-carbon economy, insurers will need to employ strategies beyond the scope of traditional underwriting”

To understand and help clients navigate the changing risk profile of green assets and respond with appropriate insurance cover, insurers must work closely with energy companies, technology firms and research institutions to share their risk expertise and data insights. A combined, cross-industry approach to modelling risk can enable a deeper understanding of key protection gaps where specialist products and enhanced risk management solutions may be required. There is significant opportunity to form early alliances to harness market talent and collaborate to drive innovation and build the capabilities needed to help clients’ transition to net zero.

Through cross-sector partnerships, insurers can harness a wealth of knowledge available within the wider ecosystem. These insights lead to a deeper understanding of clients’ environmental exposures, vision and plans to evolve their business models towards more sustainable solutions. This provides insurers with the opportunity to strengthen client relationships by positioning themselves as a key transition partner, aligning products to what matters most to clients and advising them throughout their transition journeys. Those that succeed will become meaningful business partners for their clients, enabling the scale and pace of ambition, while accelerating the global transition towards a more sustainable world.

Isabelle Santenac is EY global insurance leader