Howden's De-Risking Summit: A call for insurance-led climate action

Rowan Douglas' opening keynote transcript on enabling the climate breakthrough

I'm so excited that at this summit today our sector and the wider de-risking landscape is now being properly embedded into the climate mainstream. 

We're launching a report today with BCG that outlines the requirements of insurance in de-risking between now and 2030 to support committed investment. The report is about what is currently required to support the $20 trillion of new investment, coupled with the demands that we are going to be facing from physical climate risk and the related regulatory and other changes.   

Insurance may have been a sleeping giant for a while but now we have got to understand it as a strategic platform. 

So, what has insurance really got to do with climate risk and the transition?

There are three legs of the climate transition stool. There is the resilient transition to deal with the physical effects of climate and its shocks. There is the low carbon transition and there is also the just transition - unless we protect those communities who are affected by the physical or the low carbon transition, we will never get the collective support or the political buy in to undertake the transition. You just have to look back in history to understand that the institution of insurance underpins all three of those transitions. And yet tragically, our industry but also our politics and our wider economic system has forgotten those lessons.  

The 1850s was the time of the steam revolution. Heating water under pressure is dangerous and was high risk – affecting production and profits. There was a huge wave of investment, but investors were losing money. They needed insurance, but insurance companies lost money too. The Polytechnic – a group of engineers and insurers stated that they would not insure boilers unless they have the Hartford Steam Boiler Company stamp. Once the boilers had been de-risked, money flew in at the scope and scale that was needed. They stated that if you don’t insure your products and abide by certain rules, you will not have a sustainable insurance pool. There also need for zoning laws and building codes, and for fire departments to have insurance. They needed to embrace this incredible global community product – named ‘reinsurance’. That is the resilient transition.

Then there is the just transition, perhaps the most important, that effects all of us the most. As you had mass urbanisation as businesses were thriving, people migrated from families and lost the institutional fabric that have given them stability and support. They had moved to precarious jobs in urban settings with no protection when things went wrong. Social insurance systems were created to give hope to populations. In the 1950s and 1960s, there was a revolution in social insurance where we combined resources collectively through taxation and insurance to have an entitlement when things went wrong. 

There is one challenge with this story in relation to climate change. It has been written; we have the blueprint. It is a story from 1850-1950, that is 100 years. We do not have 100 years to learn these lessons again. We have two or three years to learn these lessons again and begin to create capital pools and standards.