How Sustainable Insurance Can Create a Greener World

Sustainable Insurance aims to reduce risk, develop innovative solutions, improve business performance

Sustainable insurance and creating a greener world

In the 1970s, The Munich Reinsurance Company produced a report detailing the dangers of climate change. It predicted that global warming and the associated rise in greenhouse gas emissions would lead to more flooding, storms and droughts. Fast forward to today and this has become a stark reality.

It has resulted in insurance companies changing their underwriting and investment practices due to the risks that environmental change poses. As a result, the concept of "sustainable insurance" was born, which aims to reduce risk, develop innovative solutions, improve business performance, and contribute to environmental, social and economic sustainability.

Just to give you an idea of the scale of the problem, the recent Special Report on 1.5 degrees by the Intergovernmental Panel on Climate Change states that expected net present value of damages from 2°C of warming are expected to be US$64 trillion by 2100. In 2017, uninsured losses amounted to $138 billion attributable to hurricanes and extreme weather events linked to climate change.1 This has raised the question as to whether many parts of the world are now uninsurable.

What is being done to tackle the problem? There are currently Initiatives such as the UN Environment Finance Initiative’s Principles for Sustainable Insurance (PSI) and the Cambridge Institute for Sustainability Leadership’s ClimateWise, which provide guidance to companies on how to make sustainability a key component across their businesses.

The United Nations Principles for Sustainable Insurance

  • Principle 1: "We will embed in our decision-making environmental, social and governance issues relevant to our insurance business."
  • Principle 2: "We will work together with our clients and business partners to raise awareness of environmental, social and governance issues, manage risk and develop solutions."
  • Principle 3: "We will work together with governments, regulators and other key stakeholders to promote widespread action across society on environmental, social and governance issues."
  • Principle 4: "We will demonstrate accountability and transparency in regularly disclosing publicly our progress in implementing the Principles."

The PSI has signed up some of the heavy hitters in the insurance industry including AXA, Ping An Insurance, Allianz and Swiss Re.


AXA have contributed to the understanding of climate change through their risk management expertise, the vast number of claims data they collect, and the research they can fund to address climate-related risks.2 Their climate strategy involves investing in green assets while moving away from carbon intensive industries such as coal and oil sands. AXA also supports ‘’green’’ technologies with insurance products, providing EUR 100 million worth of "green" commercial insurance (renewable energy; green buildings; electric motor vehicles).

Ping An Insurance

Ping An has developed a sustainable insurance product system that effectively addresses customer needs and mitigates environmental and social risks for a green environment, and sustainable economic development. To date it has launched 518 sustainable insurance products including environmental and ecological related products, such as environmental liability insurance, catastrophe insurance, and wildlife protection insurance; and inclusive insurance products for small and micro-businesses, farmers and other disadvantaged groups.


Allianz has created a program called ‘Sustainable Solutions’ to identify the insurance, asset management products and assistance services that they offer to improve peoples’ lives, make a positive environmental impact, or address climate-related concerns. For companies, Allianz have introduced tailor-made insurance products for large-scale renewable energy projects and green building insurance. On the retail side, they offer special discounts on car insurance for drivers with fuel-efficient and electric vehicles, and property insurance for roof-mounted solar panels.

Swiss Re

Swiss Re has also been active in its aim to mitigate climate risk and advance energy transition. In 2019, Swiss Re tailored an innovative named windstorm insurance solution for a Green Bank in the US, using a parametric trigger. The Bank financed the installation of more than 14 000 solar panels on residential and commercial rooftops across the state of Connecticut. As neither the investors nor the Green Bank own the rooftop solar panels, traditional insurance was not available for this risk. Swiss Re is also promoting sustainability through its Grand Paris Express project. The City of Paris plans to double the size of the existing metro system by adding 200 kilometres of new tracks and 68 new stations. Based on their large infrastructure project engineering and risk knowledge, Swiss Re gained the leading reinsurer position on the construction and post-construction insurance covers.As a result they are creating better access to suburban areas, stimulating economic development and growth, providing important quality-of-life improvements to all Parisians.

Green insurance

In addition to the big players in the market, insurance companies in general are also offering discounted insurance to customers who are adopting green practices to help the environment.

LEED home discounts

The US Green Building Council issues Leadership in Energy and Environmental Design (LEED) issues certifications for homes that meet specific, environmentally conscious design standards - systems which reduce water waste, insulation reducing cooling and heating costs and installation of toxic free materials keeping homes healthy. Fireman’s Fund Insurance Company offers people who already own LEED-certified homes a 5-percent discount off regular annual insurance premiums, saving homeowners around $100 per year.

Green rebuilds

Some insurance companies give you the option to rebuild with eco-friendly materials should you experience a loss or damage. While this may add a little bit to your monthly premiums, the insurance companies will cover added expenses to replace the damaged items with energy-efficient or eco-friendly options. Farmers Insurance of Los Angeles has an “Eco-Rebuild” product that is available as an addition to a regular homeowner’s policy for $25 or 2 percent of the annual premium. In the event of a loss, the Eco-Rebuild endorsement means Farmers will pay extra to replace your old kilowatt-hungry appliances with Energy-Star devices and recycle debris, rather than send destroyed materials straight to a landfill.

Green auto insurance

Traditional gasoline and diesel vehicles are a major contributor to air pollution and global warming. The movement toward hybrid and electric vehicles is one step forward to a better environment. Travelers and Farmers, for example, give hybrid and alternative fuel vehicle drivers a 10 percent discount off while Geico offers 5 percent off for eco-friendly motorists.

Step by step

The move towards sustainable insurance is driven through recognition that the planet faces major challenges from climate change, global warming and the rise in greenhouse gas emissions resulting in flooding, drought and extreme weather. For sustainable insurance to work it needs close co-operation between advisory bodies such as the UN and insurers on a global level. However, insurance companies need to work with their customers to promote green products and initiatives. It is not going to happen overnight but by working together steps become strides become leaps.




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