Insurance in a changing world
Insurance is fundamentally about valuing and managing risk. As global challenges evolve, so too must insurers, adapting their models and strategies to keep pace with a rapidly changing climate—both environmental and economic. In most markets today, sustainability issues have become a core component of risk management frameworks rather than an afterthought.
Last week, at an insightful event at The Conduit, industry leaders explored the evolving role of insurers in driving good growth, improving data sharing, enabling prevention, and redefining risk. A few key takeaways from the discussion:
- Insurers are continuously innovating, shifting from traditional natural catastrophe coverage (earthquakes and windstorms) to more complex risks, such as hurricanes, floods, and wildfires.
- By quantifying risk, insurers have driven businesses forward — helping to mitigate cyber threats, de-risk emerging energy technologies, and support the green transition.
- However, the protection gap is growing. As data collection and climate risk modelling improve, a critical question arises: What happens when areas, businesses, or homes become uninsurable?
- The discussion challenged the perception of insurers as mere safety nets. With their wealth of data, insurers are uniquely positioned to shift from damage control to proactive adaptation, ensuring communities and economies are better prepared before disasters occur.
- Blended finance is emerging as a key tool to address the widening protection gap. By combining public, private, and concessional capital, businesses can lower insurance costs and unlock investment in risk reduction, ensuring long-term resilience in vulnerable sectors.
- When insurers act as strategic partners, they can help reduce premiums across supply chains, supporting global businesses in securing key raw materials.
- While risk modelling is improving, it is important to remember that these models rely on synthetic histories. Data sharing can help bridge knowledge gaps, but we must move away from assessing risks in silos and focus on educating businesses and financial institutions about risk. For example, building on floodplains is possible—with the right awareness and resilient infrastructure.
Redefining Risk for a Resilient Future
Cross-industry and cross-sector collaboration is essential. A key challenge is balancing short-term financial pressures with long-term resilience—taking inspiration from life insurance, which operates on extended time horizons.
Insurers must remain profitable, and investment arms must generate returns to support premium payouts for climate-related disasters. However, short-term investment strategies often conflict with long-term sustainability goals. Building due diligence into investment strategies is a crucial step towards mitigating the worst harms.
At the heart of these discussions was the need to redefine risk itself. Risk is not just financial; it has human, social, and environmental dimensions. We must ask:
- How can we quantify the human impact of risk and incorporate it into insurance models?
- How should we value things we have never priced before, such as biodiversity loss, tipping points, or the melting ice caps?
As we face an uncertain future, the history we have is not the future we face. Now is the time to rethink how we assess, mitigate, and innovate around risk—building a more resilient world for future generations.
What This Means for Businesses and Insurers
- For Businesses and Financial Institutions:
- Have you started assessing climate and nature risks within your operations and supply chain?
- Are you leveraging data and modelling to inform your risk mitigation strategies?
- Could blended finance solutions help protect your assets and ensure the longevity of your services?
- For Insurers:
- Are you thinking strategically about your role beyond underwriting?
- How are you supporting clients in proactive risk mitigation rather than just providing financial recovery?
- What does the sustainable growth of your business look like in a changing world?
Now is the time to integrate forward-thinking risk management into business and financial decision-making. If your organisation wants to explore how to turn risk into resilience, let’s start the conversation.