GFIA Annual Report 2023-2024

Climate risks

Industry perspective and recommendations

GFIA works on a major protection gap study and comments on supervisory guidance on climate risks

By Christian Pierotti, chair of the GFIA Climate Risks Working Group

In 2023, insured natcat-related damage reached US$117 billion, nearly double the average for the past 30 years. The significant increase can be attributed to the steady rise in the number of low- and medium-intensity disasters since the early 2000s.

For the past four years, insured losses have consistently exceeded the US$100 billion mark, a trend expected to continue with forecasts indicating a rise of about 5% per year. However, the vast majority of global losses remain uninsured, a reality tragically underlined by the catastrophic earthquake in Syria and Turkey in 2023, which claimed over 58,000 lives. The damage was concentrated in poorly protected areas, with around 90% of total losses uninsured.

These figures are a stark reminder of need to increase insurance penetration, in light of the critical role of the insurance industry in helping those affected by these events recover as swiftly as possible. But the industry can also play a role in other areas, such as promoting preventive measures.

The key focuses of GFIA’s work over the past year include reflecting on prevention and resilience issues and commenting on the development of supervisory guidance on climate risks.

Industry perspective on the climate risk supervisory framework

In 2024, the working group submitted a joint response to IAIS’s second, third and fourth consultations on climate risk supervision. The second response focused on supporting material that addressed issues related to market conduct and scenario analysis. The third proposed changes to selected Insurance Core Principles (ICP) guidance and supporting material to reflect climate risk. The fourth response centred on new supporting material to better reflect climate-related risk.

Second consultation

Third consultation

GFIA response to IAIS consultation 3rd package consultation

Fourth consultation

GFIA's response to the second consultation focusing on market conduct welcomed the IAIS emphasis on the prevention of greenwashing practices and highlighted the sector’s willingness to align with best practices. It also acknowledged the sector’s good faith efforts in promoting climate disclosures and called for regulatory frameworks that are proportionate, clear and tailored to the specific needs of various insurance sectors, ensuring both accessibility and affordability for all. On climate scenario analysis, GFIA encouraged supervisory authorities to ensure that standards are applied effectively and adapted to the specific needs of different jurisdictions. The working group also stressed that scenario analysis methodologies are still in their preliminary stages of development. GFIA’s response on proposed changes in selected ICP guidance highlighted the necessity to apply proportionality when considering climate risks for insurers.

GFIA submitted its response to the fourth consultation on climate risk in end of October. In it, it highlighted the importance of the concept of materiality in assessing the impact of climate risks for climate-related risk disclosure and stressed the need to avoid redundant reporting requirements. Regarding macroprudential and group supervisory issues, GFIA emphasised the role of insurers as mitigators of systemic risks and highlighted that supervisory actions should be proportional and integrated within existing frameworks.

Speaking out on the industry's critical role in addressing climate risks

Building on the insurance sector's engagement in promoting global resilience, the group has been reflecting on land use planning and more precisely on the capacity of the insurance sector to enhance communities' ability to withstand climate impacts. Indeed, land use planning can mitigate risks associated with increasing natural disasters. The group reflection encompasses prevention, collaborations, risk-based approach, and building back better strategies. The idea is to address risks in their entirety by proposing actions before, during and after the occurrence of a natural disaster. This would involve establishing collaborations that leverage each party’s expertise to provide precise information, while also combining skills to develop land use planning tools such as zoning, risk-based approaches and sustainable reconstruction strategies.

“The idea is to address risks in their entirety by proposing actions before, during and after the occurrence of a natural disaster.”

Facilitating collaborative dialogue

GFIA has continued its dialogue with many other stakeholders and institutions that are committed to achieving a low-carbon economy and promoting green investments.

In March 2024, the UN Environment Programme organised the “Buildings and Climate Global Forum” in collaboration with the French government and with the support of the Global Alliance for Buildings and Construction. On this occasion, as chair of the group I had the opportunity to represent GFIA in a workshop called “Assets and insurable buildings in a changing climate” to provide the industry’s perspective on the role of insurance in the resilience and adaptation of the building sector and to promote the GFIA report on global protection gaps.

In May 2024, the working group welcomed a team leader from the OECD Climate Change Adaptation Task Force who presented their report entitled “Infrastructure for a Climate-Resilient Future”, which was published at the OECD Forum on Infrastructure for Resilience. This was an opportunity for constructive dialogue with the OECD, thereby informing the group’s research on the impact of land use planning on reducing the climate risks.

Looking ahead, the group plans to organise a virtual workshop on the insurability of the future in the beginning of 2025 to initiate our reflections COP30 in Brazil. The objective will be to provide an industry perspective on the role of insurance in resilience and adaptation.

Christian Pierotti

France Assureurs

Christian Pierotti

France Assureurs

Print version

Awareness-raising campaigns

Insurers across Europe are involved in a broad range of awareness-raising campaigns. For instance, in Germany, risk-awareness campaigns are implemented jointly by state authorities, consumer protection organisations, the insurance industry, architects and other stakeholders. Their collaboration is built around a common goal: to raise awareness of the effects of climate change and natural hazards, of the benefits of loss prevention, and of best practices as regards natural catastrophe-resilient buildings. The high level of risk awareness in Germany is one of the reasons for the relatively low protection gap; indeed, the insurance penetration rate for natural perils such as storm or hail is more than 90%.
Most European insurance associations have initiatives to raise risk awareness, such as dedicated workshops, events and educational seminars, as well as frequent in-depth articles, themed newsletters, presentations and other publications.
Many French insurers have launched prevention campaigns and also support the campaigns of “Assurance Prévention”, an association founded by the French insurance association (France Assureurs). Assurance Prévention has produced numerous leaflets, infographics, quizzes, etc. to raise awareness of natural risks. Through its initiatives, it aims to develop a “culture of risk prevention” among students and teachers.

The Greek insurance association (HAIC) launched a digital awareness campaign — “Better to know than to think you know” — to provide consumers with useful information about private insurance and to set the record straight on some misperceptions. The campaign consists of six videos to educate the public about how private insurance works. Most of the videos emphasise the need for resilience in the face of natcat risks and the role of insurers in protecting private property. The videos are hosted on the interactive iknow-insurance.gr platform, which allows visitors to do a short quiz to test their knowledge of private insurance and then obtain additional information.
Insurance Sweden is currently working with its members on a common methodology for calculating carbon dioxide emissions during building repairs. The aim is to raise awareness of the impact on CO2 emissions of rebuilding after fire or water damage, and thus of the importance, from that perspective as well, of preventing such damages.
Insurance Sweden published a statistical report in October 2021 on how different municipalities and regions have been affected by damage caused by flooding, storm and fire.
Spotlighting the central role of municipalities in climate-change adaptation, Insurance Sweden ranks Swedish municipalities according to their adaptation work. The methodology is based on the European Commission’s Adaption Support Tool (2013). The ranking is released every other year, the June 2021 version is available here.
UNESPA, the Spanish insurance association, launched a dedicated website in October 2021 — “Naturalmente Protegidos” (Naturally protected) to explain how natcat insurance works in Spain. It focuses on 10 different risks (rain, flood, wind, drought, frost, hail, snow, earthquake, volcanic eruption and lightning) and details for each how insurance covers property, life, harvests and livestock. The website illustrates the success of the Spanish public-private natcat insurance model. It was jointly developed by private insurers (UNESPA), the Consorcio de Compensación de Seguros (CCS) government scheme and Agroseguro, Spain’s agricultural insurance system, and was launched within the framework of Estamos Seguros, UNESPA’s financial education campaign (running since 2016).
In collaboration with CEPYME, the Spanish confederation of SMEs, UNESPA launched in October 2020 “Prevenir para crecer” (Prevent to grow), a website with information on insurance for SMEs. The website highlights potential risks to which SMEs are exposed, including natcat-related risks, and provides advice on how to prevent them.
Insurance Ireland, the Irish insurance association, and a number of Irish insurers have launched consumer blogs and information repositories on their websites to share useful information with consumers about responsible and ESG investing.

Education

The European insurance industry works to increase financial literacy in relation to risk awareness, insurance protection and long-term savings:

The Croatian Insurance Bureau (HUO) launched a first educational project in 2009, “Financial literacy in the Republic of Croatia”, which was followed by a range of educational activities, often implemented jointly with independent insurers. One of these activities, “Safer Tomorrow”, was initiated in 2021, and aims to raise citizens’ awareness of the benefits of insurance. Within the framework of the project, HUO launched several videos and infographics, some of which specifically target young people.
The HUO organises a yearly competition for the best scientific paper, the best graduate thesis and the best undergraduate thesis in the field of insurance. HUO also publishes the “Croatian magazine for INSURANCE”, a scientific journal for professionals to advance good practice in the sector. Finally, some insurers in Croatia created a colouring book for children to promote financial literacy at a young age in a fun and simple way.
In Italy, the ANIA Academy, together with CeTIF (Research Centre on Technologies, Innovation and Finance of the Università Cattolica del Sacro Cuore), launched the second edition (2022) of the 2nd level master’s in insurance management to train professionals and enable them to respond to the challenges of the “new normal”.
ANIA is also collaborating with LUISS Business School to develop a major course in insurance management as part of its Executive Master in Financial Management.
Insurance Europe produces information for consumers as part of its “InsureWisely” financial education initiative. This includes one-pagers on different insurance topics, including how to limit the effects of natural catastrophes.
The French insurance association (France Assureurs) developed a series of educational booklets within the framework of EDUCFI (the French national strategy for economic, budgetary, and financial education), an initiative launched by the French Central Bank. These booklets help users to better understand how insurance works and what insurance products do and do not cover.
The Spanish insurance association (UNESPA) set up a financial education programme for schools, “El Riesgo y Yo” (“The Risk and I”). It involves 40 insurance undertakings and 164 volunteers and aims to give 2 500 teenage school students basic financial knowledge and insights into risk management.