Insurance sector can lead on sustainability in turbulent times, Bayes seminar hears

Bayes launched its breakfast seminars series with a discussion around the insurance industry's role in tackling climate change led by Irem Yerdelen and Dr Simone Krummaker

Industry leaders, academics and policymakers grappled with the challenges and opportunities around sustainability in the insurance industry at the first of Bayes Business School’s breakfast seminars last week.

The discussion was led by Irem Yerdelen, the newly-appointed Deputy Chair of the UK's Transition Finance Council and a managing partner with responsibility for sustainability and climate solutions at ERM, the world’s largest sustainability consultancy firm.

Ms Yerdelen acknowledged that the priority accorded to climate change has fluctuated significantly in the face of a turbulent political and geo-strategic environment and the covid pandemic.

Ms Yerdelen, who is a Bayes alumna, said: “The insurance industry should not be a constraint to sustainability transformation and instead become a catalyst for change.”

She set out what she saw as the three key pillars that link insurance to sustainability:

  • Adaptation and resilience
  • Transition to a low carbon economy
  • Sustainable investments.

While noting the sector’s long history in managing risks around natural disasters, she said climate-induced events such as wildfires and floods have placed greater pressure on insurers to innovate.

“Adaptation and resilience have always been at the heart of the insurance industry. However the rise in climate-induced events such as wildfires and floods has placed greater pressure on insurers to innovate."

Emerging products like parametric insurance and nature-based solutions, while promising, have yet to scale across the market. The challenge is to make these solutions attractive and scalable.”

Strong partnerships

The sector should also continue to work with governments and businesses to support the transition to a low carbon economy by de-risking projects and acting as an enabler, she said. Insurance firms should also forge partnerships to address the affordability issues and limited data availability that are currently limiting the impact of green innovations such as battery storage and alternative energy sources such as hydrogen.

“Insurers should take a more active role in project finance ecosystems, integrating themselves from the outset to enable the successful scaling of much needed transition projects. They can drive impactful change by supporting innovative industries, processes and goods – while disinvesting from oil and gas,” Ms Yerdelen concluded.

Her comments led into a vibrant discussion around broader systemic challenges for embedding sustainability further in insurance market, such as a short-term focus on profit and regulatory constraints – which participants agreed stifle innovation.

Ms Yerdelen suggested that such challenges could only be navigated through engagement and collaboration – both within the insurance value chain and with policymakers and industry groups. WCI’s iSustain initiative, she added, will have a convening role for the sector on sustainability topics.

As well as being the first in a series of monthly breakfast seminars with industry leaders and civil servants, the event served as the launch of the School’s ‘future of insurance’ research theme, led by Dr Simone Krummaker, Associate Professor of Insurance and Associate Dean of MSc Programmes.

Bridging the gap between academia and business

Before introducing Ms Yerdelen, Dr Krummaker spoke about the importance of knowledge transfer between academia and industry – and emphasised that sustainability was a key element in any discussion around the future of insurance.

She said: “There have been many individual climate change initiatives and activities across the industry globally, and the issue has sometimes flared up into public consciousness but then faded again. Today is not about moaning over that or the problems. We all know now that we really need to walk the talk rather than keep on talking. So, even though we are here this morning to talk. I hope we can come up with ideas that will produce tangible actions, ideas or topics for research and collaboration with the industry and the Worshipful Company of Insurers’ sustainability initiatives.”

Avani Mandlik Pandey, a student on Bayes' Insurance & Risk Management MSc programme, who attended the event, said: "This was an insightful experience. The discussions around the catalytic role of insurance in sustainability, the importance of adaptation and resilience, and the need for a long-term focus were eye-opening. I believe that fostering greater collaboration across all levels - from investors and business owners to regulators, insurers, reinsurers, and emerging talent - is key for building a more sustainable and resilient future!"

Noting that there were several members of the Worshipful Company of Insurers around the table, Dr Krummaker said that insights from the seminar would feed into the company’s work around sustainability.

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