As the last of three major international conferences with the potential to shape the future of development draws to a close, in this blog post Nicola Ranger Director of the Global Finance and Economy Group at the ECI and the Resilient Planet Finance Lab, gives her views on what part the insurance industry plays.
As economies grow more complex and interconnected in a world of changing climate and environmental risks, the role of insurance in supporting that growth, ensuring stability, and promoting equity will only become more critical.
A common theme at the G7, the IMF/World Bank Annual Meetings and the United Nations Biodiversity Conference has been how to mobilise private sector investment and innovation for development and biodiversity and climate goals. As global leaders sit down with financiers to find solutions, insurers should also get a prominent seat at the table. We argue that insurance plays five crucial roles in unlocking innovation and investment and give examples of how insurers are already helping to protect and restore nature.
Insurance is big business. Globally last year, more than $6 trillion in annual premiums were collected covering everything from cars and homes, to businesses, infrastructure construction, financial transactions, to people’s lives and medical care. These premiums helped secure investments – be it a mortgage, an investible asset or new business venture - and helped communities build back after disasters, such as the wildfires in Europe and the 28 separate billion-dollar extreme weather events seen in the USA. The total risk-bearing capacity of the global reinsurance market and index-linked securities like catastrophe bonds alone was estimated at well over $800 billion in 2023 – providing a global ‘cushion’ to disasters.
The question then is how we can better deploy this ‘risk capital’, as well as the risk knowledge of the industry, to tackle one of the main barriers to private innovation and investment in emerging markets and developing economies (EMDEs) - namely risk.
This is an extract from a blog post co-written by the ECI’s Dr Nicola Ranger, who is also Executive Director of the Oxford Martin Systemic Resilience Initiative, and Olivier Mahul, a Visiting Fellow at the Oxford Martin School (OMS), where he works on climate finance, systemic resilience and development.
Read the blog in full on the OMS website.