Last week, I was able to attend several Climate Week events in NYC 2024. This annual convening of thought leaders is crucial in driving top-down influence in the fight against climate change across every industry. Insurance has always been a priority of ours at climate week, but this year it was impossible to ignore the growing emphasis on insurance across all attendees, from venture investing to broader finance.
Historically, insurance discourse at climate events has revolved around resiliency and adaptation. Given that insurers have shouldered much of the financial burden from the physical damage caused by climate change , it's understandable that the industry has focused on mitigating and avoiding losses. Insurance has often been viewed as a tool to manage risk, especially as natural disasters increase in frequency and severity. However, this year, the conversation took a proactive turn.
The tone of 2024's discussions signaled a shift toward a more forward-looking role for insurers in preventing climate change itself. The industry’s growing engagement with “de-risking” clean energy and energy transition projects reflects a deeper involvement beyond traditional risk management. This shift not only introduces new players to the nuances of insurable risks but also demonstrates the powerful influence that Climate Week can have in aligning industries with climate action goals.
But the top-down influence observed during Climate Week NYC must be followed by meaningful action on the ground. As individuals within the industry, especially those involved in transactions, we have a responsibility to carry this momentum forward. Here are a few reflections on how insurance can continue to evolve as a force for change in the fight against climate change:
Engage Early
Every project or company must face a complex landscape of risk management. Engaging with insurers early in the process allows for crucial resiliency and adaptation considerations to be integrated into planning. This not only lowers insurance costs but also helps avoid costly last-minute surprises.
Early engagement can identify specialized products designed to transfer or reallocate risks that a project might not want to retain. By incorporating these solutions from the beginning, project stakeholders can model both the costs and benefits, ensuring more accurate planning and execution.
Quantify the Value of Insurance
Insurance is often perceived as an unavoidable expense, rather than a tool to create value. Shifting this perception requires a clear focus on the value an insurance policy provides. What measurable benefits does it bring to a project? Which key performance indicators (KPIs) does it optimize? These are key questions to answer.
At the same time, project owners and investors need to adopt an outcome-oriented approach. By isolating the tangible benefits of an insurance policy—whether it's protecting revenue streams or mitigating unforeseen costs—they can better balance the value it provides with its cost. The focus should be on achieving problem-solution fit, where insurance plays a critical role in enabling the success of a project.
Be Specific
Insurance can be broad and flexible, but to be actionable, it is crucial to be specific about the risks that need to be covered. This is especially important for emerging risks linked to the energy transition.
Taking a detailed approach to understanding the steps that could give rise to a loss, the potential economic impact, and the benefits of mitigating that risk ensures that the insurance solution is tailored and effective. For example, by mapping out the risk scenarios in a renewable energy project—such as operational downtime due to extreme weather—stakeholders can design an insurance solution that directly addresses these challenges, providing both financial protection and operational stability.
Comments