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4 key themes for the insurance industry at New York Climate Week

New York Climate Week, launching on Sunday 17 September, will once again focus minds on the urgent business of tackling climate change.

From greening the built environment to investing in nature, here’s what to look out for in New York Climate Week.

New York Climate Week, launching on Sunday, September 17, will once again focus minds on the urgent business of tackling climate change. With the world having experienced its hottest July on record, and summer infernos blazing from Greece to Hawaii, the scale of the challenge could not be more apparent. 

In 2023, New York Climate Week will revolve around ten main themes: built environment, energy, environmental justice, transport, finance, sustainable living, nature, politics, industry and food.

In our support of industry, an important topic for Marsh is the mapping of climate vulnerabilities in supply chains. Recent issues, such as how the drought in the Panama Canal has affected shipping, highlight the importance of this topic – and bring to light the kind of risks explored in relation to the Suez Canal in Marsh’s report last year.

Here are four additional themes on the New York Climate Week program we’ll be watching closely.

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New materials and methods can make buildings greener and more resilient – but they can also create new risks. The involvement of insurers is critical for enabling construction projects to mitigate the risks and speed the uptake of these methods and materials.

Examples include cross-laminated timber, a strong and lightweight construction material that can have a low carbon footprint, if the wood used to make it comes from well managed forests. However, it is a relatively novel material, leading to insurance industry discussions about quantifying and managing the risk.

Cement is among the hardest-to-abate industries, but various ways to lower its carbon footprint are being developed – such as replacing a portion of the cement in concrete with various waste byproducts from industry or agriculture. From an insurance perspective, it is important to be confident that non-standard concrete mixes are insurable during the construction period and for the structure’s operational life.

As with building materials, insurers can help manage the risk of investing in frontier technologies supporting renewable energy. Additionally, the effects of climate change on renewable energy infrastructure requires attention. For example, how should an asset’s inspection and maintenance regime change to reflect a different climate such as extreme heat or dust storms.

The hydrogen market could be worth US$150 billion by 2025 – and, as one of the sessions in New York explores, it could be key to decarbonizing New York by storing excess surplus energy generated by offshore wind farms. However, investment in hydrogen projects can be held back by concern about risks such as construction delays and liability issues. Marsh recently responded to these challenges by launching the world’s first dedicated facility to insure green and blue hydrogen energy projects.

Climate and nature are intrinsically related, with complex overlaps and trade-offs. However, so far nature risks have been treated quite differently in terms of requirements for business, with more attention paid to standardizing assessments on climate. This is now starting to change, and the Task Force for Nature-Related Financial Disclosure is due to publish recommendations on September 18, the first event day of Climate Week.

Insurers are not only looking at risks of damage, but also risks to the continuity of business from the failure of ecosystem services – on which more than half the global economy depends, according to a much-quoted World Economic Forum study.

In Taiwan, for example, some semiconductor manufacturers are having to bring in water by tanker to supplement supply impacted by nature degradation. In California, almond farmers are bringing in bees because nature locally is so depleted, reducing the number of wild pollinators.

As businesses become more aware of nature-related risks, the challenge for insurers is to translate their extensive work on understanding climate risk into insurance products that offer the right incentives for benefiting nature as well as climate. For example, some ways to reduce the risk of damage from storm surges – such as restoration of mangrove forests – also help ecosystems.

Effective action in all the above areas and others depends on the availability of finance for investment. Climate finance is increasing, with more banks setting targets for their portfolios related to emissions and other environmental issues.

The insurance industry has the tools, expertise, and resources that can help to mobilize finance for investment supporting the transition to greener technologies and adaptation to the changing climate.

The insurance industry has a crucial role to play by supporting the transition to a green economy, while helping businesses become more resilient to today’s climate risks.

We look forward to continuing these discussions in New York.