Climate Change in Action

Sometimes climate change seems like a remote issue. So it’s fitting that while travelling to one of the most remote corners of this country, Churchill, Manitoba, the realities of climate change suddenly became very real to me personally.

It also became clear that we as insurers have a role to play in tackling the issue. And with that responsibility comes opportunity.

Climate Change in Action

RSA was invited in November 2010 to join our corporate partner, WWF-Canada, and an exclusive group of companies on a tour of the far north to see the impact climate change is having on the Arctic and the polar bears that inhabit the shores of the Hudson Bay.

I travelled with RSA’s chief financial officer Nick Creatura and RSA employee Sylvie Paradis, who was invited after winning an internal contest that awarded a coveted prize to the team with the most innovative and feasible idea in helping to lower our company’s carbon footprint. In this instance, Sylvie and her team devised a paper reduction initiative resulting in thousands of dollars of savings.  Sylvie was selected from her team in a random draw to join us on an adventure that would completely transform the idea of climate change as we knew it.

Extreme weather events, aging infrastructure and increased water damage claims have placed climate change high on the agenda for insurers in recent years. There can be no denying that our world is changing; given that insurers often use the past to help predict the future, the unpredictability of this changing world is troubling for our industry.

This was not a new concept for me. And yet, standing on the shore of the Hudson Bay looking out over open water on a shockingly warm Arctic day in November, was chilling. I was watching climate change in action.

WWF-Canada’s senior species officer Dr. Peter Ewins says our group was witnessing one of longest “ice-out periods” in living memory. The longer it takes for ice to form, the longer the polar bears inhabiting the area are trapped on shore and unable to hunt seals. Scientists say that after 120 days on shore, this iconic species starts to experience serious physiological symptoms due to extreme weight loss and other devastating effects such as lower birth weights and smaller litters. At the time of our journey, the polar bears we saw had been on shore more than 150 days.

This is significant, because scientists have long viewed the Arctic as the barometer of health for our planet’s overall eco-system. The changes to Arctic climate are a prelude to the increased risk that insurers are likely to face going forward. We have already seen the early effects. According to the Insurance Bureau of Canada, water damage makes up the highest proportion of property claims, increasing from 20% to 50% of claims over the past nine years. In 2009 alone, water damage claims cost the Canadian insurance industry more than $1 billion.

Renewable Energy

The pace at which our world is changing can be overwhelming and daunting, but there is room for optimism and opportunity for insurers who want to be part of the solution. Both the Insurance Bureau of Canada (IBC) and the Association of British Insurers (ABI) have called on insurers to face the challenges of climate change and play a role in supporting adaptation and mitigation. According to the report, Insurance in a Climate of Change: The Greening of Insurance in a Warming World, sponsored by the U.S. Environmental Protection Agency, “the insurance sector is a lightning rod, serving as global integrator of impacts across all sectors of the economy, and messenger of these impacts through the terms and price signals it projects to its customers… The implications of rising disaster losses on insurers are as important as defining the industry’s role in furthering understanding of the problem and advancing loss-prevention solutions.”

If that sounds lofty, you may be relieved to know the solution to climate could already be in our grasp, according to WWF-Canada. They believe climate change is largely an energy issue. To reduce our greenhouse gas emissions, WWF-Canada says, we must produce more energy from renewable sources and use energy more efficiently and wisely.

“By investing in renewables, we can meet our energy needs and create a sustainable green economy while passing on a healthy planet to our children and all future generations,” says Josh Laughren, director of climate and energy at WWF-Canada.

This is exciting news for insurers and brokers who are involved in renewable energy solutions. There has been significant growth within the sector in Canada over the past 12 to 18 months, particularly in Ontario, mainly due to the provincial government’s Feed-in-Tariff (FIT) and microFIT programs.

RSA launched its microFIT insurance product in the summer of 2010 for home and small business owners who started their own “micro” renewable electricity generation projects on their properties. Those participating in the program are able to sell the energy produced to the grid and receive stable prices under long-term contracts. As a renewable energy insurer with global scope, RSA is continuously looking at ways to leverage our expertise to help combat climate change. There is also an opportunity for insurers to use risk management expertise and innovative product development to help devise solutions for energy savings, particularly around claims handling.

In claims and other areas, we are seeing more products on the market now that provide customers with the opportunity to upgrade to more sustainable appliances and building materials in the event of a claim to their home and business. These upgrades not only help make homes and buildings more energy efficient but can, in some circumstances, help provide additional resilience against the impact of extreme weather. Our aging infrastructure and its vulnerability to extreme weather require the strengthening of building codes, stronger designs values and land use risk mapping – all areas where insurers can leverage expertise.

Sustainable Corporate Behaviour

Climate change also provides an opportunity for insurers to adopt more sustainable behaviour within their own organizations, by seeking ways to reduce their footprint and energy consumption internally. By changing our own behaviours, we are in a stronger position to share best practice across the industry with brokers and customers. For innovative companies, the possibilities are endless. An article by the Intergovernmental Panel on Climate Change sums up nicely the position insurers can take, stating: “The future role of insurance in helping society to cope with climate change is uncertain. Insurers may rise to the occasion and become more proactive players in improving the science and crafting responses. Or, they may retreat from oncoming risks, thereby shifting a greater burden to governments and individuals.”

Having personally witnessed the chilling impact of a warming Arctic, I hope we all choose to be proactive players in tackling climate change.

For more information on RSA and WWF’s partnership or the trip to Churchill, please visit www.wwfrsapartners.com.