Aviva’s Blamey calls for more government incentives to encourage net-zero transition

By Rebecca Delaney

April 22 - (The Insurer) - Aviva’s chief sustainability officer Claudine Blamey warned that the global economy remains fundamentally misaligned with meaningful progress on climate, nature and sustainability actions as she addressed a webinar hosted by the London & International Insurance Brokers Association on Tuesday.

Speaking at the event, hosted in partnership with Bankers for Net Zero, Blamey called for more government incentives to encourage the net-zero transition

“Insurers have the ability to support the transition because they've got both sides of the balance sheet. That’s a real advantage, both as an underwriter and a long term-investor, but we really need governments to put into place policies that shift the economic incentives in favour of transition. I don't quite think we've got there yet," she said.

Blamey continued that while there have been “some really good moves forward” by the current UK government, there remains challenges for insurance companies looking to invest annuity capital into certain long-term green infrastructure projects that are part-financed by the National Wealth Fund (NWF).

“Current regulatory rules and the types of guarantees offered by the NWF make it quite difficult for insurers to compete against banks in this space,” said Blamey.

“The regulator has now set up a working group with the NWF, Treasury and insurers to establish a common understanding. I think this is going to be really important, getting together to really think about what finance looks like in this space, and what blended finance looks like going forward.”

As well as a shortage of government incentives to invest in green projects, the insurance sector’s facilitation of the transition is strained by short-term underwriting cycles that don’t align with the longer-term thinking around climate change.

There are also issues around risk data gaps, which undermine the pricing information processes for assets that lack historical data, meaning that underwriting is partially based on proxies and assumptions.

Also speaking on the panel, Rowan Douglas, CEO of climate risk and resilience at Howden, outlined that general failure to see insurance as a form of contingent capital also acts as a barrier to addressing the risk-related challenges associated with climate change.

“Insurance is fundamentally a form of contingent capital against a set of contingent liabilities that we face. But, for some reason, the world of insurance, almost sociologically and culturally, has become quite separate from the wider world of finance,” said Douglas.

“We need to have these climate risks properly quantified and recognized as contingent liabilities. We need to properly understand, and to some degree recognise, these risks, but also critically recognise insurance as a contingent asset.”

Douglas called for a cohort of “progressive” insurers, including brokers, to work with similarly progressive bankers and investors on an entrepreneurial basis to examine how to de-risk the latter to enable greater lending and investment into the transition.

“This is all about old wine in new bottles,” Douglas concluded.

“Whether it's the net-zero transition, the resilient transition, or the just transition, insurance is what enables us to come together, decide what we value, what we want to protect, and the rules to make that more sustainable from a risk perspective. We just need to re-learn some old lessons.”