sectoral economic costs and benefits of ghg mitigation - IPCC

Households and Services
Impact of Greenhouse Gas Mitigation on the Insurance
Industry
Oliver Zwirner
Summary
No comprehensive study into the costs and benefits to the insurance industry is yet available.
Undoubtedly one of the reasons for this is that the financial sector is generally affected by
climate change indirectly. Indirectly, in the sense that, as a result of measures taken to reduce
greenhouse gases, the situation changes for clients of banking and insurance. Companies from all
regions and all branches of industry, state bodies and individual households are all customers of
the financial sector. Greenhouse gas mitigation changes the basic conditions for customers and
what we need to study is how these changes affect the basis for doing banking and insurance
business. Is there an increased risk of defaulting on loans or increased demand for investment
financing? Is the risk of fire damage lessened? Do certain shares increase in value? In order to
carry out a detailed and quantitative analysis of the indirect effects on the financial sector,
appropriate greenhouse gas mitigation scenarios must be established for the various customers
groups and regions.
The three main areas in which effects are likely to be felt are:
1. Management of operating processes that give rise to greenhouse gases
2. Investment in securities and real estate
3. Non-life insurance.
The direct effects of green house gas (GHG) mitigation will be felt at the sites that emit
greenhouse gases. The average annual per capita emissions of an employee in a financial services
company in the German-speaking countries is 4.5 tons which is significantly higher than percapita
emissions of many countries. CO 2 emitted as a result of energy consumption in the
banking and insurance sector accounts for 0.6 % of overall CO 2 emissions in Germany. Ways to
tackle this are to install more efficient heating and air-conditioning systems and replace travel by
video-conferencing and use of e-commerce. In order to do this investment is necessary but that
investment can be profitable straight away.
As regards investments, the main task will be to identify the issuers of securities that have a proactive
strategy for dealing with GHG mitigation. There are aids being developed for this purpose,
such as environmental sustainability rating and the CO 2 indicator.
In real estate management, major investment is likely to be required to bring about a significant
reduction in energy consumption.
In the GHG mitigation scenario the level of weather-related claims will only go down in the long
term compared to the business-as-usual scenario. In the short and medium term, any increase in
claims as a result of storms, etc. can only be curbed by taking measures to adapt to climate
change.
Looking at other than weather-related risks we see that these risks decrease as a result of GHG
mitigation. This applies to the automobile sector, to the extraction, transport and use of mineral
oil and to buildings and technical plant. One reason for this is that increasing energy efficiency
means modernizing old plant in which accidents are more likely to happen.
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