Nations of the world will need to come to grips with climate change and seek ways to cut carbon emissions while fulfilling the growing need for energy consumption—all of which spells growth opportunities for insurers, a new report says.
Swiss Re, in its latest report, “Building a Sustainable Energy Future: Risks and Opportunities,” lays out six scenarios under which nations will implement plans to deal with carbon emissions from fossil fuels.
Swiss Re says that no matter what strategy the world adopts to cut carbon emissions, total abandonment of fossil fuels is not an option. In fact, the report says, “fossil fuel energy will remain the dominant energy source for power generation for quite some time.”
However, there is no escaping the need to reduce greenhouse gases, the report says.
Andreas Spiegel, head of Sustainability and Political Risk at Swiss Re, and the report's author, says in a statement that “adaptation to climate change will increase in importance because the window of opportunity for mitigating climate change is getting much narrower.”
For insurers, the change in the energy landscape will present new opportunities. The need for energy growth will be most acute in Asia, which is expected to account for 50 percent of annual global energy financing by 2030.
Depending on which climate change mitigation policies are adopted in the future, expenditures on technology to deal with the issue are predicted to rise from $4.3 trillion in 2010 to somewhere between $4.6-$6.1 trillion by 2030.
The total annual expected loss across all energy technologies, fossil, renewable and carbon capture and storage, in 2010 was $19.5 billion, with $900 million attributable to renewable energy. That figure is expected to increase substantially by 2030 to $25.6 billion and in the “greenest” scenario more than double to $41.7 billion, says Swiss Re.
“Much of this increase is due to higher investments in newer and less mature technologies, including renewables,” the report says.
“Insurers should support the further development of low carbon-intensive power production,” says Agostino Galvagni, CEO, Swiss Re Corporate Solutions. “They need to be innovative and provide solutions along the whole value chain. For example, insurers can enable project financing through construction insurance and reduce cash flow volatility of intermittent energy production through weather risk transfer solutions.”
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