What can insurers do faced with climate change?

Insurance – a business sector directly concerned

Impacted by the rise in the frequency and intensity of climatic events, insurers are faced with an increase in the number of claims. To meet this major challenge, they are gathering together their forces. The latest joint action to date was the signing of the Sendai declaration in Japan in March 2015 during the third conference of the United Nations on the prevention of natural disasters and risks. The aim of the commitment made by the French Insurance Association (AFA), which groups together the FFSA and the Gema, is to encourage cooperation between insurers and local authorities in the management of natural disasters. In March, in order to support energy transition, the sector already set the objective of doubling the amount of green investments to reach 420 billion dollars by 2020. The Sendaï declaration reasserts the determination of insurers to develop solutions in favour of an economy with low carbon emissions with resilience in the face of climate change.

Developing innovative initiatives

One of the current problems for insurers is the emergence of new risks in agriculture and the insurance resources to meet them. Five years ago, Pacifica invested in research and development to come up with financial protection for farmers faced with these new risks. The general insurance branch of Credit Agricole Assurances, in cooperation with Airbus Defence & Space, launched a scientific research programme in connection with the Finance and Sustainable Development department of Paris-Dauphine University and the Ecole Polytechnique, under the aegis of the Institute Europlace de Finance Foundation. The aim of the programme is to reach a better understanding of the new risks and to develop innovative insurance products to meet the financial protection needs of farmers. The initial work undertaken by the various teams resulted in the creation of a Fodder Production Index (FPI) based on satellite remote sensing tools providing estimates of fodder production on a local scale. The correlation between that index and actual growth was established scientifically by protocols which resulted in scientific publications in international journals.

Pacifica created the first grassland insurance for livestock farmers. This policy provides the farmer with a capital sum in the event of any drop in fodder production following a climatic event, in particular after drought. Since the autumn, the FPI on the scale of each small fodder production region has been made available free of charge to farmers by Airbus Defence and Space on the Website www.pleinchamp.com. The Grameen-Crédit Agricole foundation joined forces with this research work to benefit from expertise that is especially useful for developing countries. This technology is of particular interest for stakeholders on the international scene where needs are equally considerable.

Other clearly identified levers of action

Given the amount of the assets under management, the nature of the investments made by institutional investors such as Crédit Agricole Assurances is a determining factor in the volume of greenhouse gas emissions. For several years, we have striven to increase the proportion of real estate assets benefiting from environmental certification in the real estate portfolio of outlets and offices. From now on, any new programme will aim to obtain environmental certification. Moreover, by investing in renewable energy programmes – such as wind farms – we support the energy transition towards low-emission technologies.

As of the end of 2014, Crédit Agricole Assurances had invested 93.7 million euros in renewable energies in energy infrastructures mainly located in France. Furthermore, insurers are duty bound to adopt an asset management policy more focused on socially responsible investments.  As a signatory of the Principles for Responsible Investment (PRI), we take account of environmental, social and governance factors (ESG) in our analyses and decisions for investments and in their monitoring with the implementation of reports to measure the progress made. This extra-financial scoring relies on the expertise of Amundi. The asset manager of the Crédit Agricole Group has designed a benchmark with 37 criteria with respect to the laws and directives in force.