Nature and the Insurance Industry:

Taking action towards a

nature-positive economy

November 2022
Nature and the Insurance Industry:
Taking action towards a
nature-positive economy

Maryam Golnaraghi, Director Climate Change & Environment, The Geneva Association

Contributing author:
Adrien Mellot, former Climate Change & Environment Intern, The Geneva Association

Nature and the Insurance Industry: Taking action towards a nature-positive economy 1
The Geneva Association

The Geneva Association was created in 1973 and is the only global association of insurance companies; our members
are insurance and reinsurance Chief Executive Officers (CEOs). Based on rigorous research conducted in collaboration
with our members, academic institutions and multilateral organisations, our mission is to identify and investigate
key trends that are likely to shape or impact the insurance industry in the future, highlighting what is at stake for
the industry; develop recommendations for the industry and for policymakers; provide a platform to our members
and other stakeholders to discuss these trends and recommendations; and reach out to global opinion leaders and
influential organisations to highlight the positive contributions of insurance to better understanding risks and to
building resilient and prosperous economies and societies, and thus a more sustainable world.

Photo credits:
Cover page– Drew McArthur / Irina Markova

Geneva Association publications:

Pamela Corn, Director Communications
Hannah Dean, Editor and Content Manager
Petr Neugebauer, Digital Media Manager

Suggested citation: The Geneva Association. 2022.

Nature and the Insurance Industry: Taking action towards a
nature-positive economy. Authors: Maryam Golnaraghi and
Adrien Mellot. November.

© The Geneva Association, 2022 All rights reserved

www.genevaassociation.org

2 www.genevaassociation.org
Contents

Foreword 5

Table of abbreviations 6

1. Executive summary 7

2. Introduction 9

3. Human activities and large-scale, nature-based risks: A two-way street 12

3.1 The impact of human activity on nature and biodiversity loss 12
3.2 The impact of nature and biodiversity loss on society 16
3.3 Nature and climate change 22

4. External factors driving nature-related considerations into core business decision-making 26

4.1 International agreements and socio-economic policies 26
4.2 Efforts to quantify the financial risks associated with nature and biodiversity loss 28
4.3 Investing in natural capital as part of sustainable finance frameworks 28
4.4 Attention of financial regulatory bodies to the financial risks of nature and biodiversity loss 28
4.5 Nature-related litigation 30
4.6 Corporate, sovereign and municipal credit ratings 31
4.7 Growing investor and shareholder awareness 31

5. The insurance industry and nature-related risks and opportunities 33

5.1 Opportunities for re/insurers 37
5.2 The challenges of scaling up nature-related underwriting and investing 43

6. Recommendations 45

Appendix: Nature- and climate change-related terminology 48

References 50

Nature and the Insurance Industry: Taking action towards a nature-positive economy 3
Acknowledgments

We would like to thank the members of The Geneva Association (GA)’s Emerging Environmental Risk
Advisory Committee, which was established under the GA Climate Change & Environment Working
Group, for fruitful discussions, reviewing the report and for the advice, content and feedback they
provided throughout the project:

• Oliver Schelske, Martin Weymann and Bernd Wilke (Swiss Re)

• Jon Peeples (Philadelphia Insurance Companies, a member of Tokio Marine Group)
• Chip Cunliffe (formerly of AXA XL) and Mary Ann Susavidge (AXA XL)
• Steven Piatkowski and Dorothée Prunier (Chubb).

We greatly benefited from discussions with the following experts, who provided examples for the report
and reviewed earlier drafts:

• Mark Way, Jonathan Charak, Patrick McBride and David Edsey (Zurich North America)
• Cherie Gray (Swiss Re)
• Tamaki Bieri, Sarah Heard, Eric Roberts and Fernando Secaira (The Nature Conservancy)
• Kim Hum (formerly of The Nature Conservancy)
• Jennifer Howard, Emily Corwin and Miguel Cifuentes-Jara (Conservation International)
• Michael Beck (University of California, Santa Cruz)
• Nigel Brook, Wynne Lawrence and Zaneta Sedilekova (Clyde & Co)
• Dennis Noordhoek (The Geneva Association)

We are also grateful for our discussions with and feedback from members of the Working Group,
established in support of our Climate Change & Environment research activities. Finally, we thank
Baptiste Moinier, a former Climate Change Intern at the GA, for his contributions to the literature review,
and the GA's Associates and Editorial Committee for providing helpful comments.

4 www.genevaassociation.org
Foreword
Nature loss is occurring far more than any of us realise. And it is essentially man-made.
Take the Ukraine war, for example. Beyond the tragic loss of lives, the impacts on nature
are massive. Warfare disrupts species and destroys habitats, sometimes rare ones. This is in
addition to the fact that most military aircraft and ships still run on fossil fuels.

Climate- and nature-related risks do not only exist in parallel; they comprise a dangerous
feedback loop. Deforestation contributes to the significant release of carbon into the
atmosphere and therefore to global warming. Warming oceans compromise coral reefs – an
important buffer for coastal communities and infrastructure against natural disasters such as
hurricanes.

Insurers are among those trying to reverse this feedback loop with nature-based solutions. For
example, the Mesoamerican Reef System, the largest barrier reef in the Atlantic Ocean, now
benefits from an innovative parametric insurance solution that finances restoration in the
event of hurricane-related damage. Hurricane Lisa in November 2022 effectively triggered the
first pay-out under this policy.

Insurance initiatives on the asset side are arguably more advanced, with insurers investing
more in forestry and increasingly divesting from industries that adversely affect the
environment.

These are early days. Solutions are nowhere near sufficient scale. Re/insurers are still learning
about nature-related risks, particularly when it comes to key, nature-dependent sectors like
agriculture and construction. It is also essential to fully assess the environmental impacts
associated with producing and deploying the new technologies required for the climate
transition.

What is at stake with large-scale, nature-related loss is still being researched. Together with
the scientific community, environmental experts and policymakers, insurers will strive to
further understand and carry out nature-positive activities and resilience-building towards a
sustainable economy.

Jad Ariss
Managing Director, The Geneva Association

From Risk
Nature andTransfer to Risk Industry:
the Insurance PreventionTaking action towards a nature-positive economy 5
Table of abbreviations

CBD Convention on Biological Diversity

CBSD Climate Disclosure Standards Board
CI Conservation International
EbA Ecosystem-based adaptation
EFRAG European Financial Reporting Advisory Group
ESG Environmental, social and governance
ESRS European Sustainability Reporting Standards
EVs Electric vehicles
GA The Geneva Association
GDP Gross domestic product
GHG Greenhouse gas
IFRS International Financial Reporting Standards
IPBES Intergovernmental Science-Policy Platform on Biodiversity and
Ecosystem Services
IPCC Intergovernmental Panel on Climate Change
IPSF International Platform on Sustainable Finance
ISSB International Sustainability Standards Board
MAR Fund Mesoamerican Reef Fund
NatCat Natural catastrophe
NbS Nature-based solutions
NGFS Network for Greening the Financial System
NGOs Non-governmental organisations
P&C Property & casualty
PBAF Partnership for Biodiversity Accounting Financials
PCAF Partnership for Carbon Accounting Financials
TCFD Task Force on Climate-Related Financial Disclosures
TNC The Nature Conservancy
TNFD Task Force on Nature-Related Financial Disclosures
UN United Nations
UNEP-FI United Nations Environment Programme Finance Initiative
WEF World Economic Forum

6 www.genevaassociation.org
 1. Executive summary

The sustainability of natural capital is vital for socio-economic development

and prosperity. Yet, nature has systematically been considered an externality –
undervalued and mispriced by the public and private sectors. Since 2019, however,
a number of flagship reports have presented clear and concrete evidence of the
large-scale impacts of the pollution and depletion of natural capital due to human
activity, as well as the significant implications this has for people and businesses.

The World Economic Forum (WEF)’s 2022 Global Risk Report identified large-scale
nature degradation and biodiversity loss as one of the five most threatening long-
term risks facing the world in the next five to 10 years. Industries that are highly
dependent on nature generate 50% of global gross domestic product (GDP), the
three largest sectors being construction, agriculture and livestock, and food and
beverages. Larger economies, in particular China, the EU and the U.S., have the
highest absolute amounts of GDP in nature-dependent sectors.

Large-scale nature degradation and biodiversity loss is

one of the top five long-term risks facing the world in
the next five to 10 years.

Importantly, climate change and large-scale nature loss are interlinked from
both cause and effect perspectives. It has been demonstrated that nature-based
solutions both increase resilience to physical climate risks (climate change
adaptation) and sequester carbon (climate change mitigation). At the same time,
the large-scale deployment of new technological solutions for the decarbonisation
of energy and other sectors to achieve net-zero targets comes with myriad risks,
such as environmental and disposal risks, that could have profound impacts on
nature. Addressing climate change and nature and biodiversity loss concomitantly
with a system-based approach is therefore necessary if either is to be solved.

The need to protect natural capital is gaining global attention. A number of external
factors are transforming nature-related risks and opportunities from a scientific
and environmental issue to a core business issue: the evolving public policy and
regulatory landscape; efforts to quantify the financial risks associated with nature
loss by the Task Force for Nature Related Financial Disclosure (TNFD); sustainable
finance frameworks; financial regulatory bodies’ increasing attention to the financial
risks of large-scale nature loss; rising litigation; the incorporation of nature-related
issues in corporate, sovereign and municipal credit ratings; and growing investor
and shareholder awareness and actions.

The need to protect natural capital is gaining global

attention.

Nature and the Insurance Industry: Taking action towards a nature-positive economy 7
For the past 30 years, re/insurers have provided leadership
in natural catastrophe (NatCat) risk modelling and pricing; Nature-related risks are becoming a
conducting research on, raising awareness of and promoting
risk reduction and preventive measures; and offering risk
major driver of future socio-economic
transfer solutions to build societal resilience to extreme development and core business
events. In 2020, The Geneva Association launched an decision-making.
industry-led task force to advance and accelerate the
development of forward-looking climate change risk
assessment and scenario analysis tools. These efforts centre
on assessing the materiality of physical, transition and 3. These risks could impact re/insurers in a variety of
litigation risks and their interactions over the short and ways. On the underwriting side, the scale and scope
long term to provide decision-relevant risk information of nature-related risks may threaten insurability
for developing climate targets, strategies and transition in property and casualty (P&C) insurance while
plans. In the last few years, some re/insurers have also there may be implications for longevity, mortality
been supporting science-based research to explore the risks and morbidity rates on the life & health side. The
associated with large-scale biodiversity and nature loss, to changing landscape may render existing underwriting
quantify the benefits of nature-based systems for increasing models obsolete, and a lack of data could be a
resilience to extreme events, and for carbon sequestration. major bottleneck to assessing and pricing risks
Recent reports by AXA, Swiss Re and the Muséum National and developing effective insurance solutions and
d’Histoire Naturelle in Paris, later in partnership with the investment strategies. Rising physical climate risks
SCOR Foundation, have provided a systemic view of the also pose threats to insurers’ investments, as well as
risks associated with large-scale biodiversity and nature their own real assets.
loss, how they relate to the re/insurance business model
and the opportunities this presents for the development of 4. Innovative insurance products and services as
innovative insurance products. well as investment strategies that account for the
interlinkages between climate change and nature
This report offers a comprehensive overview of the could lead to win-win situations. On the liability
latest developments in this field, based on a literature side, insuring nature-based solutions can enhance
review of the scientific evidence. It further explores the resilience to physical climate risks and lead to carbon
interconnectivities of nature- and climate change-related credits. Insurers can also invest in the restoration
risks and details the factors that are driving these issues and conservation of nature-based ecosystems and
into core business decision-making. Building on the solutions, and develop investment strategies that
literature review and discussions with experts from 25 support sustainable business practices.
insurance companies, we frame the risks and opportunities
from the insurance business model perspective and offer 5. Establishing demand for and supply of insurance
the following key messages. products targeted at the protection of nature-based
systems will take time and comes with four primary
1. A paradigm shift in the societal perception of large- challenges: 1) combatting the misperception that
scale, nature-related risks is anticipated in the coming nature can be exploited for free, forever; 2) correctly
years. We expect these risks to become a major driver pricing products and identifying customers who would
of future socio-economic development and core benefit from them – and who are willing to purchase
business decision-making. More applied research that them; 3) a lack of data and tools for quantifying the
quantifies the benefits of nature-positive activities for value of nature-based systems in monetary terms;
addressing climate change, establishes best practices and 4) policy and regulatory issues.
for assessing the risks of nature and biodiversity loss,
and evaluates the impact of mitigation actions is 6. Nature-positive activities and resilience building
required to encourage meaningful action at scale and should be at the centre of a sustainable economy.
attract more coordinated and aligned funding. Acting now can reduce current and future exposures to
nature-related risks and lead to business opportunities
2. Re/insurers could experience nature-related risks whereas delaying could exacerbate the risks to a point
through four main channels: 1) societal vulnerability of no return. Understanding and mapping the risks,
to physical climate risks, disease transmission, health raising awareness and developing new, innovative risk
issues and pandemics; 2) impacts on insureds and management solutions and investment strategies is
investees with unsustainable business models and an exploratory and iterative process that requires
supply chains; 3) secondary impacts of unsustainable cross-sectoral collaboration and alignment, as well
government developmental approaches; 4) reduction as strong buy-in and commitment from stakeholders
in greenhouse gas (GHG) sequestration. across the public and private sectors.

8 www.genevaassociation.org
 i 2. Introduction

Nature encompasses several dimensions of the physical world – oceans, land, the
atmosphere and freshwater, as well as different kinds of life (biodiversity). Healthy
nature and biodiversity provide numerous benefits to society. In the past decades,
both our dependencies and our impacts on nature have increased significantly.
Between the 1950s and 1980s, the United Nations (UN) brought the need for
‘sustainable’ development to the forefront of international policy dialogue.1
Various UN agencies and programmes have also presented evidence on and
highlighted the impacts of ‘development’ – as it relates to population growth – on
large-scale environmental degradation, ozone depletion, health-related concerns
and accessibility to clean water, energy and food. Subsequently, a number of
international framework agreements have been facilitated by the UN to address the
protection of nature in relation to socio-economic development.

Healthy nature and biodiversity provide numerous

benefits to society.

Several agreements target specific topics, but it is being acknowledged that many
of these issues are deeply interconnected. For example, collaborative efforts among
UN agencies prior to the three milestone framework agreements of 2015 (i.e. The
Paris Agreement,2 Sendai Framework on Disaster Risk Reduction3 and Sustainable
Development Goals4) brought focus to the interlinkages between sustainable
development, climate change and disaster risk management.5 Furthermore, since
2019, a number of reports have led to a paradigm shift in the international
dialogue on large-scale nature degradation and biodiversity loss linked to human
activity, transforming it from a scientific and environmental issue to a core driver
for socio-economic development.6 These reports have also offered solid evidence on:

• The scale of human impacts (e.g. consumption behaviours, industrial and

business practices and government development approaches) on nature
degradation and biodiversity loss

• How large-scale nature loss leads to significant and increasing socio-economic

and business-related risks

• The importance of nature-based solutions for climate change adaptation and

mitigation measures.

1 The Geneva Association 2017. Authors: Maryam Golnaraghi and Patrick Khalil.
2 UN 2015a.
3 UN 2015b.
4 UN 2015c.
5 The Geneva Association 2017.
6 Including Dasgupta 2021; WEF 2020, 2022b; CBD 2020; IPBES 2019; IPBES and IPCC 2021;
Oragnisation for Economic Co-operation and Development (OECD) 2019; Swiss Re 2020a;
IPCC 2021, 2022a,b.

Nature and the Insurance Industry: Taking action towards a nature-positive economy 9
There is an urgent need to quantify the pace of nature
loss, its impacts on society and the benefits of nature and Many ecosystems are close to tipping
biodiversity. Current economic and business models exploit
nature far more rapidly than it can regenerate itself, with
points, beyond which they may be
accelerating biodiversity loss and ecosystem degradation unrecoverable.
directly linked to human activity.7 Yet, nature is essential
to human existence, quality of life and livelihoods. This
is evidenced by the heavy reliance of global GDP (USD to quantify the value of nature and the financial impacts of
87.65 trillion in 2019)8 on nature, with over 50% of it its degradation through the TNFD.
depending on natural capital and ecosystem services.9
Assessing and valuing biodiversity and ecosystem services Importantly, climate change and large-scale nature
is complex and still under development. However, the loss are inextricably linked from both cause and effect
most comprehensive global estimates suggest that perspectives. In 2021, the first joint report of the
nature provides a value of USD 125–140 trillion per year, Intergovernmental Panel on Climate Change (IPCC)
more than one and a half times global GDP.10 Still, nature and the Intergovernmental Science-Policy Platform
remains systematically undervalued in decision-making by on Biodiversity and Ecosystem Services (IPBES)
all economic and political actors,11 with the total cost of concluded that the world must tackle climate change
subsidies that damage nature estimated at between USD 4 and biodiversity loss together if either issue is to be
to 6 trillion per year.12 successfully solved.17 The world needs to strive towards
a resilient, net-zero, nature-positive economy to tackle
the climate and nature crises.18 The conservation and
Over 50% of global GDP is restoration of natural ecosystems are critical elements of
climate adaptation and mitigation strategies.19 The need
dependent on natural capital and for long-term investments to address these issues is also
ecosystem services. driving sustainable finance frameworks at the regional and
national levels to address changes in the financial sector
and enable capital allocation towards GHG-neutral and
Inconsideration for and undervaluation of nature’s worth nature-positive activities.20
to society mean that insufficient attention has been given
to its sustainable management, as reflected in market While the insurance industry, through its environmental
prices (externality) and measures of economic well-being.13 liability products, has enabled faster response to the
For example, the depreciation of natural capital is not clean up of spills, the speed, scale and scope of nature
included in GDP.14 The cost of biodiversity loss is already and biodiversity loss linked to human activity present
high, with an estimated USD 6.3 trillion per year due to a whole new range of risks and opportunities for the
land degradation only.15 industry. In recent years, some re/insurers have been

Moreover, nature loss risks are non-linear and many

ecosystems are close to tipping points, beyond which
they may be unrecoverable. This would have significant The speed, scale and scope of nature
environmental and socio-economic consequences. and biodiversity loss present a new
Given the exposure to biodiversity loss and its financial
materiality, the case for action is gaining attention.16 range of risks and opportunities for
Global efforts are underway through the financial sector the insurance industry.
and leading global, nature-based, non-profit institutions

7 IPBES 2019; National Footprint and Biocapacity Accounts 2022.

8 World Bank data: https://data.worldbank.org/indicator/NY.GDP.MKTP.CD.
9 WEF 2020, 2022a,b; Swiss Re 2020a.
10 OECD 2019.
11 IPBES 2022b.
12 Dasgupta 2021.
13 IPBES 2022b.
14 Ibid.
15 Sutton et al. 2016.
16 Cambridge Institute for Sustainability Leadership (CISL) 2020; OECD 2019.
17 IPCC 2021, IPBES and IPCC 2021.
18 WEF 2020, 2022a,b; WEF and PwC 2020.
19 IPCC 2021, 2022a,b.
20 Finance for Biodiversity Initiative 2022a.

10 www.genevaassociation.org
supporting science-based research to explore the myriad • The socio-economic benefits of nature-based
risks associated with large-scale nature loss, quantify solutions and the linkages with climate change
the benefits of nature-based systems for increasing adaptation and mitigation measures
resilience to extreme events and for carbon sequestration,
and develop innovative insurance products and more • The external factors driving nature-positive
sustainable investment strategies.21 The links between considerations into core business decision-making for
climate change and nature-based systems are also being corporates and re/insurers
explored by The Geneva Association to address societal
resilience to extreme weather events and mobilise • The challenges and opportunities for re/insurers
support to enable the global net-zero transition.22 Several associated with the development of a nature-positive
preliminary efforts by other stakeholders (e.g. the UN, economy and business models, and related ‘win-win’
regulatory and supervisory bodies, insurance brokers and opportunities to address climate change.
multilateral development banks) are also underway to
explore the value proposition of the insurance industry in The report is based on an in-depth literature review, as
this area.23 well as discussions with experts from 25 re/insurance
companies24 and two leading global, nature-focused,
Against this backdrop, this report provides a non-profit organisations working with the insurance
comprehensive overview of the latest developments in this industry in this area.25 The terminology used in this report
field and offers an overview of: is detailed in the Appendix.

• The latest scientific evidence on the impacts

of human activity on nature, the materiality of
large-scale, nature-related loss on society, and the
interconnectivities between nature- and climate
change-related risks

21 For example, AXA Research Fund 2022; AXA 2019; MNHM and SCOR 2022; Swiss Re Institute 2021; Swiss Re 2020a,b.
22 The Geneva Association 2019. Author: Maryam Golnaraghi; The Geneva Association 2021a-d. Authors: Maryam Golnaraghi et al.; The Geneva
Association 2022. Authors: Maryam Golnaraghi et al.; Golnaraghi 2022.
23 Sustainable Insurance Forum (SIF) 2021; UNEP-FI PSI 2019; The World Bank 2022; Marsh Mclennan 2022.
24 This involved discussion with members of the Geneva Association Climate Change & Environment Working Group and the Emerging
Environmental Risks Advisory Committee from the following companies: ACHMEA, AIG, Allianz, Aviva, AXA, AXA XL, Axis Capital, Chubb,
Fidelidade, Hannover Re, IAG, Intact Financial, MAPFRE, MetLife, Munich Re, Phoenix Group, Prudential Financial, Renaissance Re, RGA Re, SCOR,
Tokio Marine, Tokio Marine HCC, Swiss Re, Vidacaixa, Zurich.
25 The Nature Conservancy and Conservation International.

Nature and the Insurance Industry: Taking action towards a nature-positive economy 11
 3. Human activities and
large-scale, nature-based
risks: A two-way street

“Although the world’s 7.6 billion people represent only 0.01% of

all living things by weight; humanity has already caused the loss of
83% of all wild mammals and half of all plants. The current rate of
extinction is tens to hundreds of times higher than the average over the
past 10 million years and is accelerating.”26

WEF’s 2022 Global Risk Report27 identified large-scale nature degradation

and biodiversity loss as one of the top five most threatening, long-term issues
facing the world (Figure 1). WEF also highlights that the interlinkages of highly
damaging environmental risks, including climate change inaction, extreme weather
and biodiversity loss, are deeply connected to other social (livelihood crises),
geopolitical (social cohesion erosion) and economic risks threatening the world.

3.1 The impact of human activity on nature and biodiversity loss

Over the last few years, a number of major studies have presented undeniable
evidence about the global scale of the impacts of human activity on nature and
biodiversity loss.28 Human consumption and production patterns, governments’
development approaches to urbanisation and land use, as well as industrial
practices and business models in a variety of economic sectors (e.g. extraction of
natural resources, operations, waste management) have led to what scientists call
‘a massive planetary crisis.’

“Threats emerging from (1) food, land and ocean use; (2)
infrastructure and the built environment; and (3) energy and
extractive sectors, together with climate change, impact 79% of near-
threatened species.” 29

26 WEF and PwC 2020.

27 WEF 2022b.
28 Dasgupta 2021; WEF 2020, 2022b; CBD 2020; IPBES 2019; Swiss Re 2020a; IPBES and IPCC 2021;
OECD 2019; IPCC 2021 2022a,b.
29 WEF 2022b.

12 www.genevaassociation.org
A number of flagship reports have captured the extent of the impacts of human activities
on oceans, freshwater, land and air, as well as natural ecosystem degradation and
biodiversity loss, with some potentially reaching their tipping points. A few examples are
highlighted in Table 1. Simply put, we are destroying the very resources that our economy
and livelihoods profoundly depend on, in some cases irreversibly.

Figure 1: Global risks horizon — When will risks become a critical threat to the world?

% of respondents
Extreme weather 31.1%
Livelihood crises 30.4%
Climate action failure 27.5%
Social cohesion erosion 27.5%
lnfectious diseases 26.4%
0–2 years Mental health deterioration 26.1%
Cybersecurity failure 19.5%
Debt crises 19.3%
Digital inequality 18.2%
Asset bubble burst 14.2%

Climate action failure 35.7%

Extreme weather 34.6%
Social cohesion erosion 23.0%
Livelihood crises 20.1%
2–5 years Debt crises 19.0%
Human environmental damage 16.4%
Geoeconomic confrontations 14.8%
Cybersecurity failure 14.6%
Biodiversity loss 13.5%
Asset bubble burst 12.7%

Climate action failure 42.1%

Extreme weather 32.4%
Biodiversity loss 27.0%
Natural resource crises 23.0%
Human environmental damage 21.7%
5–10 years Social cohesion erosion 19.1%
lnvoluntary migration 15.0%
Adverse tech advances 14.9%
Geoeconomic confrontations 14.1%
Geopolitical resource contestation 13.5%

n Economic n Environmental n Geopolitical n Social n Technological

Source: WEF30

30 WEF 2022a.

Nature and the Insurance Industry: Taking action towards a nature-positive economy 13
Table 1: Implications of human behaviour for nature-based capital

Oceans Freshwater

Fishing industry: Fashion industry:

• 66% of the total ocean area is subject to • Responsible for 20% of global
intensive fishing activities. wastewater.
• 93% of fish stocks are fished at or beyond • Uses >79 trillion litres of water per year.
maximum sustainable levels.
• Globally, 17.9% of marine plastic pollution Agriculture:
is derived from fishing. Nearly half of the • Accounts for about 70% of freshwater
material recovered from the Great Pacific withdrawals worldwide. This is
Garbage Patch is abandoned fishing gear. projected to increase.

Plastic industry:
• 1.2–2.4 million tonnes of plastic flow from
rivers into oceans every year.
Economic sectors • Only 9% of all plastic waste has been
recycled.

Fashion industry:
• Responsible for approximately 35%
(190,000 tonnes per year) of oceanic
microplastic pollution.

Consumption practices: Urban development and consumption

• At least 14 million tonnes of plastic escape patterns:
into the ocean every year. • Freshwater species show the largest
• Plastic makes up 80% of all marine debris. decline in population size, with 83%
loss since 1970.

People & communities

14 www.genevaassociation.org
 Land Air Biodiversity

Agriculture: Food industry: Agriculture:

• 50% of global habitable land is used for • Represents 29% of global GHG • Responsible for 80% of global
agriculture and livestock, with profound emissions. deforestation.
impacts on nature, e.g. almost 35% of • 72% of threatened or near-
mineral nitrogen fertilisers enter the Agriculture & forestry: threatened terrestrial, freshwater
oceans. Over three quarters is used • Produce 24% of all human- and marine species are overexploited
for livestock (meat and dairy), which induced GHG emissions: 12% and 62% are affected by agriculture.
corresponds to only 18% and 37% from forestry (deforestation and • Excessive use of pesticides and
of global calorie and protein supply, forest degradation) and 12% from herbicides has reduced pollinator
respectively. agriculture (40% from agricultural populations by 40% in recent
• 52% of agricultural production land is emissions from livestock). decades.
degraded.
Transport industry: Food industry:
• Responsible for 80% of global
deforestation. • 15% of total global gas emissions • Accounts for 70% of terrestrial
and 72% of global transport biodiversity loss and 50% of
• 80% of global farmland has moderate
emissions come from road freshwater biodiversity loss.
to severe erosion: 75 billion tonnes of
vehicles.
soil erode annually at a rate 13 to 40
times higher than before anthropogenic Invasive species:
Fashion industry:
acceleration. • Cumulative records of alien species
• Emits 8–10% of global CO2 have increased by 40% since 1980.
Fashion industry: emissions.
• Nearly one fifth of the Earth’s
• >92 million tonnes of textile waste surface is at risk of plant and animal
ends up in landfills/is burnt. invasions.
• Cotton farming is responsible for 24%
of insecticide use and 11% of pesticide
spread, despite using only 3% of arable
land.

Deforestation and land use: Urban development: Urban development:

• 75% of the Amazon tropical rainforest • Cities produce 70% of GHG • 50% of marshes, 35% of mangroves
has lost its resilience capacity (ability to emissions despite occupying less and 50% of reefs are either lost or
recover from extreme events). than 2% of the Earth’s surface. degraded.
• Human use directly affects more than • 99% of the global population • Mangroves declined by 20% from
70% of land surface. breathes air that exceeds World 1980 to 2005, and natural wetlands
• By 2030, urban land cover will increase Health Organization (WHO) air declined by 35% between 1970 and
by 1.2 million km2. It will have almost quality limits. 2015.
tripled since 2000.
Exploitation of wildlife:
• 50,000 wild species globally are used
for food, energy, medicine materials
and other purposes.

Nature and the Insurance Industry: Taking action towards a nature-positive economy 15
 Oceans Freshwater
Lack of coral reef conservation policies: Wastewater mismanagement:
• 50% of the world’s coral reefs are already • Wastewater treatment plants are
destroyed. currently unable to remove all plastic
• 31% of the world’s coral is at risk of particles from wastewater before
bleaching (8% in 1980s). their release into the environment or
municipal water systems.
• Projections show a 70–90% decline with
1.5°C global warming and >99% decline
with 2°C warming.

Anthropogenic oceanic changes:

Governments • Between 84–90% of marine heatwaves
between 2006 and 2015 are attributable
to anthropogenic oceanic warming.

Source: The Geneva Association31

3.2 The impact of nature and biodiversity loss on society

The primary and secondary effects of large-scale, nature-related loss on society are severe (Table 2).

Table 2: How nature-related changes impact economic sectors, governments and people

Economic sectors

Fishing industry:
• Overexploitation of fishing resources leads to a USD 50 billion shortfall each
year.

Tourism industry:
• The image of tourist destinations can be harmed by marine and coastal litter.
This may result in local tourism losses of up to 40%.
• The destruction of coral reefs endangers the coastal tourism industry and
Oceans
coastal communities (reef tourism generates USD 36 billion a year).

31 Based on the review of: AXA 2019; Boulton et al. 2022; CarbonBrief 2018; ClientEarth 2021b; Global Canopy and Vivid Economics 2020;
IPBES 2019, 2022a; IPCC 2018, 2019a,b; International Union for Conservation of Nature (IUCN) 2021; Niinimäki et al. 2020; OECD 2019, 2020,
2021a; Our World in Data 2019; Seto et al. 2012; Swiss Re 2020a; UN Habitat 2011; UNEP 2021; Valiela et al. 2001; WEF 2020; WEF and PwC 2020;
WHO 2022; World Wildlife Fund (WWF) 2019, 2020.

16 www.genevaassociation.org
 Land Air Biodiversity
Lack of land conservation policies: Waste mismanagement: Trade policies:
• Only one quarter of global land mass • Industrial incineration is used to • Cumulative records of alien species
is unaffected by human activities. This treat 15% of plastic waste. This have increased by 40% since 1980.
proportion could fall to 10% by 2050. releases 2.7 metric tonnes of CO2 • Nearly one fifth of the Earth’s
• 32% of the world’s forest area has into the atmosphere for every surface is at risk of plant and animal
already been destroyed. metric tonne of incinerated plastic invasions.
waste.
• One third of global land is severely
degraded. Fertile soil is being lost at a • CO2 emissions from the Development and industrial policies:
rate of 24 billion tonnes a year. incineration of plastics could triple • Have already caused the loss of
by 2030. 50% of all plants and 83% of all
• Global land productivity has decreased
by 20% due to land degradation and wild mammals. A million species
climate change (50% in some regions). are facing extinction, many within
decades.
• Caused an 83% population decline in
freshwater species since 1970, 60%
in vertebrate species, and 41% of
known insect species.
• There is an extinction risk of 20% of
all species within the next several
decades, perhaps twice as much by
the end of the century.

People & communities Governments

Sea-level rise and livelihood loss: Severity of storms and flooding in coastal regions:
• Sea-level rise leads to accelerated coastal erosion and • Without reefs, annual global damages from flooding are
loss of land to the ocean. expected to double. For 1-in-100-year storm events, they
• Sea-level rise exacerbates extreme sea-level events would increase by 91% to USD 272 billion.
and will increase annual expected flood damages by • Loss of coral reef cover will cost the international economy
two to three orders of magnitude by 2100 without an estimated USD 11.9 trillion. Small Island Developing
adaptation. States will be especially impacted given the ties between
their economy and coral reefs.
Plastic bioaccumulation and health: • If mangroves were lost, 15 million more people would be
• More than 10 million tonnes of plastic in the ocean flooded annually across the world. Property losses produced
are ingested by fish in the form of microplastics, which by 1-in-100-year flood events would impact 37 million more
enter the food chain and are consumed by humans.  people and damages would increase by USD 270 billion.
• Mangroves reduce annual expected flood damages from
tropical cyclones by USD 60 billion. Between 1996 and 2016,
4.3% of the world’s mangroves were lost (up to 7.2% in
certain regions).

Nature and the Insurance Industry: Taking action towards a nature-positive economy 17
 Economic sectors

• Droughts have a direct impact on yields and prices, e.g. production of coffee
beans fell by 20–30% in 2021, pushing up the global average price by 60%.
• The financial impacts of freshwater risks on water-intensive sectors are
estimated at USD 301 billion – five times higher than the cost of managing
them.
Freshwater

Agriculture:
• Land degradation and climate change will lead to a 20% reduction in global
land productivity and a 50% reduction in crop yields in some regions by 2050.
• Erosion, salinisation, soil compaction and pollution threaten about 85% of
global arable land.
Land • Decreasing soil productivity is observed in 20% of the world’s cropland, 16% of
forest land, 19% of grassland and 27% of rangeland. 
• In 12 million hectares of EU agricultural land, crop productivity falls by an
estimated 0.43% annually, costing EUR 1.25 billion.

Plastic industry:
• Microplastic pollution on land is significantly higher than at sea.
Solar energy industry:
• Significant particulate matter pollution can cause major drops in solar energy
yields because of smog. For example, the most affected areas in India and China
exhibit a potential 25% loss of yield.

Productivity:
• The annual number of lost working days due to air pollution is projected to
reach 3.7 billion in 2060 compared to 1.2 billion today.
Air

18 www.genevaassociation.org
 People & communities Governments

• Nearly one third of the world’s largest cities Water scarcity risks for economic growth:
(e.g. Los Angeles, New York, Rome and Tokyo) depend • The Middle East and North Africa have the largest expected
on nearby protected forests for water availability and economic losses from climate-related water scarcity,
quality. estimated at 6–14% of GDP by 2050.
• 40% of the global population is already affected by • 60% of China’s groundwater is polluted and rated as unfit for
water scarcity. human contact, threatening economic growth and human
• 30% of the global population lack safely-managed health.
drinking water supplies.
• Every year, nearly 300,000 children under the age
of five die of diarrhea linked to dirty water and poor
sanitation.
Agriculture: Risk to economic growth:
• More than 1.3 billion people live on agricultural land • The world lost an estimated USD 4–20 trillion per year in
that is deteriorating, putting them at risk of worsening ecosystem services from 1997–2011, owing to land-cover
hunger, water shortages and poverty. change (loss of natural areas), and an estimated USD 6–11
trillion per year from land degradation.

Welfare cost and premature deaths (from exposure Economic costs of air pollution on health:
to outdoor fine particles and ozone): • Annual costs are USD 900 billion in China, USD 600 billion in
• Costs were USD 5.3 trillion globally in 2017. the U.S., and USD 150 billion in India (6.6%, 3% and 5.4% of
• Pollution is estimated to cause 7 million premature GDP, respectively).
deaths annually, and millions more die every year
from other environment-related health risks.

Bronchial asthma:
• Affects between 100 and 150 million people
worldwide.

Wildfires:
• Are a major driver of GHG emissions.
• Wildfire smoke is responsible for 5–8% of annual
premature deaths from air pollution.

Nature and the Insurance Industry: Taking action towards a nature-positive economy 19
 Economic sectors

Agriculture:
• 75% of food crop production depends on pollination services.
• Recent decades have seen a 40% reduction in pollinators, leading to falling crop
yields.
• The loss of all pollinators represents an annual net loss in economic welfare
of USD 160–191 billion globally. This incurs additional losses of USD 207–497
billion to producers and consumers in other markets (e.g. non-crop agriculture,
forestry, food processing).
• Invasive species may cost global agriculture USD 540 billion annually
(USD 100 billion in the U.S. alone).

Biodiversity Tourism industry: Impact of coral reef destruction

• Ecotourism on coral reefs generates USD 36 billion in global tourism annually.
• By 2100, climate change is projected to result in a USD 140 billion loss in
the recreational benefits associated with coral reefs under a high emissions
scenario.

Pharmaceutical industry:
• Up to 50% of prescription drugs are based on naturally occurring molecules
from plants.
• 70% of cancer drugs are natural or nature-inspired synthetic products.
• Approximately 75% of approved anti-tumour pharmaceuticals in the past 70
years have been non-synthetic.

Source: The Geneva Association33 3233

The large-scale degradation of natural ecosystems and biodiversity loss could also lead to a whole host of other risks
(geopolitical, socio-economic, health etc.) linked to direct and indirect reliance on natural resources and ecosystems.34
According to WEF, larger economies in particular have the highest absolute amounts of GDP in nature-dependent sectors
(e.g. China: USD 2.7 trillion; EU: USD 2.4 trillion; U.S.: USD 2.1 trillion).35 Some of the fastest-growing regions in the world
are also particularly exposed to nature loss.

Large-scale, and in some cases irreversible, impacts of nature loss can have profound consequences on economic sectors
and businesses, too.36 According to WEF, industries that are highly dependent on nature generate 15% of global GDP
(~USD 13 trillion), the three largest being construction, agriculture and livestock, and food and beverages (9.2% of
global GDP). These sectors rely on nature through direct extraction of resources from oceans and forests or benefit in
their operations from healthy ecosystem services, for example, clean water, healthy soil, pollination and stable climate
conditions. Insurance, tourism and hospitality sectors are also impacted by ecosystem degradation and loss.37 These
businesses now have the opportunity to embrace nature and develop more sustainable business models.38

32 Based on WEF (2020). The percentages were calculated by the authors based on the absolute values of GDP that depend on natural commodities
(in 2019 values). Specifically, in China: USD 2.7 trillion of 14.28 trillion total GDP; in the EU: USD 2.4 trillion of 15.69 trillion total GDP; and in the
U.S.: USD 2.1 trillion of 21.37 trillion total GDP.
33 Based on the review of: Beck et al. 2018; CBD and WHO 2015; CDP 2020; Centre for Research on Energy and Clean Air (CREA) 2020; Global
Canopy and Vivid Economics 2020; IPBES 2016, 2019; IPCC 2018, 2019a,b; IUCN 2018; Landrigan et al. 2020; Lelieveld et al. 2015; Nowak et al.
2014; OECD 2016, 2019, 2021a; Panagos et al. 2018.
34 WEF and PwC 2020.
35 Ibid.
36 Ibid. Such negative impacts may arise for businesses from regulatory, legal, reputational and market-related risks, among others.
37 The Nature Conservancy and AXA 2020; Intact Centre on Climate Adaptation (ICCA) 2017.
38 Marsh McLennan 2022.

20 www.genevaassociation.org
 People & communities Governments

Vulnerability and exposure to extreme events: Risks for economic growth:

• Global loss of mangroves would result in an additional • Ecosystem services provide benefits of USD 125–140 trillion
15 million people flooded and USD 82 billion in per year i.e. >1.5 times global GDP.
damages annually.
Dependency on natural commodities:
Infectious diseases: • In China, the EU and the U.S., nearly 18.9%, 15.9% and 9.8%
• Zoonotic diseases account for 60–80% of new of GDP, respectively, depends on natural commodities (based
infectious diseases. on 2019 values).32
• 70% of zoonoses originate from human-wildlife • 55% of global GDP (USD 44 trillion of 87.65 trillion) is
interactions. moderately/highly dependent on nature due to reliance on
‘high-functioning biodiversity and ecosystem services’.

Resource scarcity:
• 44 countries (one third of the global population) face ‘high’
levels of water stress.
• 17 countries (one quarter of the global population) face
‘extremely high’ levels of water stress.

Industries that are highly dependent

on nature generate 15% of
global GDP – these now have the
opportunity to embrace nature and
develop more sustainable business
models.

Nature and the Insurance Industry: Taking action towards a nature-positive economy 21
3.3 Nature and climate change

Nature loss and climate change are inextricably interlinked, in terms of both their impacts and solutions. According to
the IPCC, ecosystems such as mangroves, wetlands and coral reefs naturally dampen the impacts of floods and storms,
while the preservation and restoration of forests and terrestrial ecosystems have among the largest mitigation potential
(e.g. carbon sequestration or carbon sinks) of all natural and technological solutions.39 Any further destruction of natural
ecosystems and biodiversity loss will only exacerbate climate change and its impacts (Box 1).

Box 1: Linking nature and climate change – Findings from the IPCC’s 6th Assessment Report

Earth’s climate system encompasses land, oceans, freshwater, the atmosphere and their complex interlinkages. The
current speed of human activities and GHG emissions disrupts nature’s ability to regulate the climate system. The
destruction of nature only exacerbates climate change and its impacts on people and ecosystems. Nature is the
ultimate tool that we should seek to protect and restore, using its full potential in climate change adaptation and
mitigation. Specifically, the IPCC reports conclude that:40

• Nature is a buffer against extreme events and climate change. It acts as a crucial natural solution to manage the
physical risks of climate change and increased GHG emissions. For example, coral reefs and mangroves buffer
flooding through wave attenuation, protecting shorelines from storm surges and cyclones. Nature is also the
world’s largest carbon capture system – the land and ocean, as major carbon sinks, have taken up almost 56%
of CO2 emissions associated with human activity per year over the past six decades. However, increased GHG
emissions and climate change impacts will reduce the ability of nature to act as a buffer, e.g. through coral
bleaching and reduced efficiency of natural carbon sinks.

• The preservation, protection and restoration of nature-based systems are crucial to climate change adaptation
through Ecosystem-based Adaptation (EbA). For example, the conservation of 30 to 50% of Earth’s land,
freshwater and ocean areas can already be leveraged for climate-resilient development, maintaining
biodiversity and ensuring essential ecosystem services.

• Nature-based systems play a critical role in climate change mitigation. Nature provides a great opportunity for
global-scale carbon sequestration and emissions reduction. For example, the Agriculture, Forestry and Other
Land Use (AFOLU) sectors of the economy can provide 20–30% of the emissions reductions needed by 2050
to maintain warming below 2°C. The protection, improved management and restoration of forests and other
ecosystems (wetlands, savannas and grasslands) have the largest mitigation potential in terms of reducing
emissions and/or sequestering carbon and are ready to be deployed at a cheap cost.

Source: The Geneva Association41

In fact, addressing nature and biodiversity loss will be crucial to the net-zero transition. For example, over 90% of
major forest, land and agriculture companies that have committed to net zero could be at risk of missing their climate
commitments due to a lack of action on deforestation. Nearly 60% of deforestation is driven by agricultural conversion
for key commodities like beef, leather, soy, palm oil, timber, pulp and paper. Companies in the forest, land and agriculture
sectors therefore have a critical role to play in achieving a net-zero and nature-positive future.42

3.3.1 Nature-based solutions and climate resilience

The protection, improved management and restoration of ecosystems can simultaneously increase climate resilience
(climate change adaptation) and help to sequester carbon (climate change mitigation). There is scientific evidence that
terrestrial ecosystems, blue carbon ecosystems and coral reefs are effective on both fronts, as highlighted in Box 2.

39 IPCC 2021, 2022a,b.

40 Ibid.
41 Based on the review of: IPCC 2021a,b, 2022.
42 Global Canopy 2022.

22 www.genevaassociation.org
 Box 2: Co-benefits of nature-based solutions for building resilience to extreme weather
events and carbon sequestration
Terrestrial ecosystems (including forests, grassland, savannas and peatlands):

• Increase resilience by acting as a natural buffer against landslides and floods. They are also beneficial against
extreme heat and air pollution in urban areas.

• Have the potential to reduce emissions and sequester 7.3 GtCO2eq/year at < 100 USD/tCO2eq, more than 20%
of current global carbon emissions.

Blue carbon ecosystems (including mangroves, tidal marshes and seagrass):

• Reduce flood risk. For example, mangroves reduce annual expected flood damages from tropical cyclones by
USD 60 billion and protect over 15 million people globally, with positive returns on investment (ROI) for flood
protection benefits.

• May capture 0.5–3% of our total current emissions if they are preserved, restored and managed. However, since
the 20th century, up to 63% of coastal wetlands have already been destroyed.

Coral reefs:

• Reduce storm and flood intensity by dampening wave energy by 97%. For example, in the U.S. alone, the hazard
risk reduction benefits of coral reefs exceed USD 1.8 billion annually. Globally, for 1-in-25-year events, reefs
provide USD 36 billion in avoided damages to build capital. For 1-in-100-year storm events, flood damages
would increase by 91% to USD 272 billion without reefs.

• Offer many co-benefits for biodiversity (they support 25% of all marine species) and coastal communities,
through tourism (they generate USD 36 billion annually) and fisheries (provide food for one billion people). Yet,
between 75% and 90% of the world’s reefs are likely to be lost by 2050 without urgent action to preserve and
restore them.

Source: The Geneva Association43

3.3.2 The role of nature-based solutions for resilient and sustainable infrastructure systems

Nature-based solutions should be considered an integral part of the design, construction, operation and maintenance
of critical infrastructure systems to reduce extreme weather risks and increase resilience (Box 3). As we look ahead,
governments and the private sector need to invest in a variety of sustainable critical infrastructure systems (e.g. energy,
transport, water management). There is a need to mobilise capital for upgrading existing infrastructure systems as well as
investing in new ones.44 Disruptions to infrastructure, for example from weather-related extreme events, can have adverse
effects on economies, harming people’s well-being and impairing economic growth. Rapidly expanding urban areas and
high-risk zones like coastal regions and floodplains are particularly vulnerable.

43 Based on the review of: Beck et al. 2018, 2022; ICCA 2017, 2020; Ferrario et al. 2014; Grima et al. 2020; IPCC 2014, 2022a; McKinsey 2022;
Menendez et al. 2020; Reguero et al. 2021; WEF 2022; Zeng et al. 2021.
44 The Geneva Association 2019.

Nature and the Insurance Industry: Taking action towards a nature-positive economy 23
 Box 3: Critical infrastructure resilience – The role of government

Approximately 150 million people and USD 9.1 trillion in coastal assets are vulnerable to the impacts of climate
change.45,46 Blending ‘green’ conservation and restoration (nature-based solutions with a focus on wetlands, coral
reefs and mangroves) with ‘gray’ infrastructure (e.g. seawalls, breakwaters, etc.) capitalises on the best of both and
is creating a new generation of climate-resilient coastal infrastructure. The goal is to increase climate resilience for
52 million of the world’s most vulnerable coastal people through high-impact, green-gray infrastructure solutions
that benefit the climate, biodiversity, community well-being and national economies.

Over the next five years, the Green-Gray Infrastructure Program47 is implementing a portfolio of large-scale projects
at sites in Guyana, Indonesia, the Philippines, Mexico, Brazil and other countries; developing and facilitating the
global adoption of standard engineering techniques for green-gray infrastructure to reduce coastal climate impacts
(led by Conservation International Green-Gray Community of Practice);48 working with champion governments to
develop national policies that incentivise green-gray infrastructure; and integrating green-gray approaches into at
least 5% of the estimated USD 1.8 trillion49 spent annually on coastal infrastructure development – more than half
of it in emerging markets.

Source: Emily Corwin and Miguel Cifuentes-Jara (Conservation International)

3.3.3 Nature-based solutions and carbon credit markets

Global carbon credit markets, both regulated and voluntary, are offering significant incentives to governments and the
private sector to invest in nature. The market value of global regulated carbon credits traded in 2021 was approximately
USD 851 billion, a 164% increase compared to 2020 as a result of higher carbon prices and a modest surge in volumes.50
The voluntary market size is currently estimated at USD 1 billion,51 with significant potential to grow over the next
decades as the world transitions to a low-carbon economy (Box 4).

The development of carbon credit markets is also providing new markets for carbon insurance coverage in relation to
nature-based systems. For example, the quality of carbon credits can vary significantly and there is the risk that some
lower quality credits may be invalidated. There is also a physical risk of loss for some types of credits, for example through
wildfires destroying trees or mangroves being destroyed by severe storms.52 Insurance against these events is an area of
increasing interest for both existing insurers and new startups in this space.53

45 Kirezci et al. 2020.

46 Nicholls et al. 2019.
47 Conservation International (undated).
48 Conservation International (undated).
49 Global Infrastructure Outlook.
50 MSCI 2022.
51 Ecosystem Marketplace 2021.
52 For example, a carbon offsetting firm accidentally started a fire in July 2022 in Spain, burning 14,000 hectares of forest (Redd-Monitor 2022).
Wildfires, extreme heatwaves, droughts and tree diseases are major sources of concern for forest offsetting and carbon credit buyers (National
Geographic 2022). Some existing insurance mechanisms have proven insufficient to compensate for the loss of carbon offsets (Financial Times 2022).
53 INSTECH 2022.

24 www.genevaassociation.org
 Box 4: Nature-based solutions and carbon markets

There are two distinct carbon markets: regulated and voluntary. As of 2020, regulated markets were nearly 500
times the size of voluntary markets.

• Regulated carbon markets are created by governments, which implement mandatory systems to cap or reduce
the emissions of specific industries.

• In voluntary carbon markets, parties purchase credits to offset their emissions on a voluntary basis. The size of
voluntary markets has increased more than fivefold since 2015, with significant potential to develop extensively
over the next year.

Investing in sustainable forestry and reforestation, grassland conservation and agricultural land management, and
the preservation and restoration of wetlands and mangroves, are among the nature-based solutions that are being
linked to carbon credit markets. Furthermore, nature-based solutions are the least expensive mitigation options,
with the majority available at < 100 USD/tCO2eq and even 40% of these at less than 20 USD/tCO2eq.

During COP26, a new framework for Carbon Trading Market Offsets was decided with revised rules for countries
and companies trading carbon. It aims to boost transparency and prevent double counting (i.e. emission reductions
counting towards multiple countries’ climate targets). However, the use of credits as part of net-zero plans is still
heavily debated. A new Voluntary Carbon Markets Integrity (VCMI) Initiative, a global multistakeholder platform,
will help ensure that voluntary carbon markets make a positive, significant and measurable contribution to the
transition of the global economy to a 1.5°C future.54

Source: The Geneva Association55

3.3.4 Environmental risks of new climate technologies for industrial decarbonisation

The deployment of new technological solutions to transition energy and other sectors to achieve net-zero targets could have
profound impacts on nature. As the world expedites the large-scale deployment of these new technologies, their environmental
footprint should be assessed with a full life cycle view (from extraction, transportation, manufacturing, construction and
operations to disposal and waste management).56 Reducing GHG emissions cannot be done at the expense of nature loss and
other environmental impacts.57 For example, as the energy
transition requires substantial amounts of metals (copper,
nickel, cobalt and lithium), their total production is expected
to rise more than fourfold from 2021 to 2040.58,59 The disposal
As the large-scale deployment of new
of assets built with these technologies (e.g. electric vehicles climate technologies is expedited,
(EVs), wind turbines, solar panels) could also have significant their environmental footprint should
large-scale environmental impacts unless solutions are
thought out with a circular economy model.60 For example, be assessed with a full life cycle view.
the environmental and nature-related risks associated with
EVs need to be considered for the entire value chain, including
exploration and extraction of rare materials,61 intermediate processing (e.g. batteries), advanced manufacturing and assembly of
components, recycling (e.g. materials used to manufacture batteries) and disposal.62

54 VCMI 2021.
55 Based on the review of: International Carbon Reduction and Offset Alliance (ICROA) 2021; UN 2021; IPCC 2022b.
56 Golnaraghi 2022.
57 Golnaraghi 2022; The Economist 2022.
58 International Monetary Fund (IMF) 2021.
59 According to the International Energy Agency (IEA 2021), a typical electric car requires six times the mineral inputs of a conventional car and an
onshore wind farm requires nine times more mineral resources than an equivalent gas-fired plant. Since 2010 the average amount of minerals
needed for a new unit of power generation capacity has increased by 50% as the share of renewables in new investments has risen.
60 See for example International Renewable Energy Agency (IRENA) and IEA (2016) and European Environment Agency (2021) for an analysis of the
end-of-life challenges of solar photovoltaic (PV) cells, wind turbines and batteries in the clean-energy transition.
61 Countries like China that are mining rare materials used in the manufacturing of batteries and solar panels are already wrestling with the
aftermath of mining. Standaert 2019.
62 Finance for Biodiversity Initiative 2022b; Hepburn 2022.

Nature and the Insurance Industry: Taking action towards a nature-positive economy 25
 4. External factors
driving nature-related
considerations into core
business decision-making

A number of external factors are making nature-related factors a core business

issue. Specifically, we highlight seven drivers in this section (Figure 2).

Figure 2: Factors driving nature-related considerations into core business

decision-making

Public policy
Quantification of and regulation
financial risks (sectoral and
and disclosure environmental)

Growing
shareholder Drivers Sustainable
finance
awareness turning nature
into a core
business issue

Credit ratings Regulatory

(corporate, sovereign, developments in
municipalities) financial services

Rising
litigation

Source: The Geneva Association

4.1 International agreements and socio-economic policies

The evidence presented and warnings sounded by the aforementioned flagship

reports have pumped new energy into the negotiation of international framework
agreements and socio-economic policy advancements. For example, negotiations
for a new ‘Post-2020 Global Biodiversity Framework’ through the UN-convened
Convention on Biological Diversity (CBD) aim to establish an agreement for nature
preservation and restoration similar to the Paris Agreement for climate change.63
A number of international forums/unions (e.g. G20, G7 and the EU) and coalitions

63 UN 2015a.

26 www.genevaassociation.org
(e.g. Coalition of Finance Ministers for Climate Action) are also drawing attention to these issues as a critical element of
future policy and regulatory development (Box 5).

Box 5: Examples of international framework negotiations and economic policy framework

developments related to nature and biodiversity loss

Global Biodiversity Framework.64 The 2022 UN Biodiversity Conference (COP15) will convene governments
from around the world to finalise a new set of goals for nature over the next decade through the Post-2020 Global
Biodiversity Framework process.

UNEP Environment Assembly. At the 2022 UN Environment Assembly, representatives from UN member states
endorsed a resolution65 to end plastic pollution and forge an international, legally binding agreement by 2024. The
resolution tackles the full life cycle of plastic, from production to disposal.

G20. The G20 Environment Communiqué66 of July 2021 shows that G20 Environment Ministers committed to
continue and increase efforts to address the interconnected challenges of climate change and nature loss. In
particular, it emphasises the potential of nature-based solutions.

G7
• Environment Ministers: 2021 saw G7 leaders agree on the 2030 Nature Compact,67 committing to halt and
reverse biodiversity loss by 2030 and conserve at least 30% of land and oceans by 2030. The Compact stresses
that the world must not only become net zero but also nature positive. G7 leaders will work across four core
pillars: transition, investment, conservation and accountability.

• Foreign Ministers: A joint statement68 on climate, environment, peace and security made in May 2022
acknowledges that the impacts of the climate and biodiversity crises pose a threat to international peace and
stability, and stresses that, conversely, peace and stability are decisive in mitigating the consequences of these
crises. It further sets out an agenda for action on nature and climate topics.

The Coalition of Finance Ministers for Climate Action. The Coalition released a report providing an overview
of nature-related risks and potential policy actions.69 After describing the interlinkages between nature, climate
and the global economy, the report discusses nature-related risk transmission channels and proceeds with policy
suggestions and recommendations for ministers of finance.

European Commission. As part of the European Green Deal and following the publication of the EU Taxonomy, the
European Commission is pursuing its efforts to integrate climate and environmental risks into the financial system:

• It adopted a series of ambitious proposals to restore damaged ecosystems and nature through its Nature
Restoration Law. The law contains legally binding targets for land, rivers and sea restoration (20% restoration by
2030; all ecosystems by 2050), as well as a 50% reduction target for chemical pesticide use by 2030.70

• In 2021 it launched a new statistical framework to better account for biodiversity and ecosystems in national
economic planning and policy decision-making.71

• The European Financial Reporting Advisory Group (EFRAG) released its draft European Sustainability Reporting
Standards (ESRS) in April 2022.72

Source: The Geneva Association, based on cited sources

64 CBD 2021.
65 UNEP Environment Assembly 2022.
66 G20 2021.
67 G7 2021.
68 Ibid.
69 Coalition of Finance Ministers for Climate Action 2022.
70 European Commission 2022.
71 European Commission 2021.
72 EFRAG 2022.

Nature and the Insurance Industry: Taking action towards a nature-positive economy 27
4.2 Efforts to quantify the financial risks 4.3 Investing in natural capital as part of
associated with nature and biodiversity sustainable finance frameworks
loss Over the last few years, advancements in the development
The TNFD seeks to develop an integrated, nature-related of sustainable finance frameworks in many jurisdictions
risk assessment and disclosure framework to support the have aimed to enable the flow of capital to address
shift in global financial flows away from nature-negative climate change as well as nature and biodiversity risks.
and toward nature-positive outcomes. The TNFD is There are already efforts to develop and harmonise
releasing its framework in a staged process,73 which is regulatory, reporting and disclosure frameworks. However,
structured around three core components: the incorporation of nature-based issues into regional and
national sustainable finance frameworks is at different
• Fundamental concepts and definitions for stages. For example, some implemented frameworks
understanding nature, establishing a common basis already have a strong focus on biodiversity in addition
for these notions to climate (e.g. EU, China, Colombia, Malaysia),78 while
other countries remain in the development phase (e.g.
• Disclosure recommendations for nature-related risks Singapore, Australia, Canada).79 If these frameworks are
and opportunities, built on four pillars: governance, not coordinated, there are risks of fragmentation across
strategy, risk management, and metrics & targets markets for global investors. The International Platform
on Sustainable Finance (IPSF) is working to harmonise
• Guidance for undertaking nature-related risk and sustainable finance taxonomies,80 standards and metrics,
opportunity assessment using a four-step process. with the support of other multilateral organisations such
as the G20 Sustainable Finance Working Group.
Importantly, the TNFD’s definition of materiality is still
evolving. The TNFD believes the location specificity of
nature-related dependencies and impacts means that the Advancements in the development
notion of materiality is meaningfully different in nature
and climate contexts.74
of sustainable finance frameworks
aim to enable the flow of capital to
To ensure the framework is consistent with the emerging address climate change as well as
global baselines for sustainability or climate reporting, the
TNFD framework builds upon the approach taken by the Task nature and biodiversity risks.
Force on Climate-Related Disclosures (TCFD). The TNFD
has identified priority topics requiring further consideration
and development on scenarios, timeframes, metrics and
targets, data-related issues and sector-specific guidance.75 4.4 Attention of financial regulatory
bodies to the financial risks of nature
Furthermore, the TNFD encourages integrated climate-
and nature-related risk management and disclosures,76 and biodiversity loss
and it recognises the need to align with the emerging Nature-related risks are starting to appear on the
global baseline for sustainability reporting standards under agendas of the global financial regulatory and supervisory
development by the International Financial Reporting community. Although, as of May 2022, there are no
Standards-International Sustainability Standards Board supervisory expectations pertaining to nature-related
(IFRS-ISSB).77 risks, there are signs of growing regulatory interest and
related activities to raise awareness about the materiality
of these issues and the need to explore the extent to
which nature-related risks cause macroeconomic and

73 TNFD 2022a,b.
74 There is a gradual convergence in research and market thinking on materiality as it relates to the impact of nature and biodiversity loss on society
and vice versa – notions such as ‘single materiality’, ‘double materiality’ and ‘dynamic materiality’ – based on the growing recognition that a
business’ impacts on nature today in a specific location can accentuate its nature-related dependencies in the medium term and therefore its risks
to enterprise value. For more information see: https://tnfd.global/faq/
75 These topics include: links between climate change and nature; the scope of disclosures, the social dimensions of nature; the meaning of ‘nature-
positive’; and the methodologies to assess the materiality of nature-related risks.
76 Yet, the two frameworks capture different concepts and are complementary. For example, unlike the TCFD, the TNFD does not focus on GHGs; the
TNFD’s focus on nature is broader than climate change, especially as it encompasses non-atmospheric, nature-related risks.
77 ISSB 2022b; TNFD 2022c.
78 European Union’s Technical Expert Group 2020; People’s Bank of China 2021; Bnamericas 2022; Bank Negara Malaysia 2021.
79 Singapore GFIT 2022; Australian Sustainable Finance Institute (ASFI) 2022; CSA Group 2020.
80 A first attempt was made to harmonise the EU’s and China’s taxonomies (IPSF 2021).

28 www.genevaassociation.org
financial instability (Box 6). For example, the Network for Greening the Financial System (NGFS) has recommended that
nature-related risks be considered by central banks and supervisors for the fulfilment of their mandates and provided
suggestions to guide them in this process.81 Furthermore, the UN-convened SIF has published a scoping paper focusing on
the links between nature and the insurance industry.82

Although the focus of many disclosure standards to date has been on climate, the IFRS-ISSB recently published two draft
disclosure standards,83 including general guidance for sustainability-related reporting as well as the reporting of climate
change-related risks.84 While the sustainability-related standard does not focus on biodiversity directly, it is addressed
in the non-mandatory guidance of the Climate Disclosure Standards Board (CDSB) Framework.85 The progress of the
TNFD, along with the recommendations of the NGFS and the expected ‘Post-2020 Global Biodiversity Framework’, have
catalysed developments on the nature-related regulatory front in 2022. Supervisors’ expectations around acting and
reporting on nature-related financial risks may well be set to rise over the years to come.

Box 6: Regulatory activities related to nature and biodiversity in financial services

International
NGFS: Following the third and final report of the NGFS-INSPIRE Study Group, which concluded that nature-related
risks could have significant macroeconomic and financial implications, the NGFS recommended that nature-related
risks be considered by central banks and supervisors in their mandates.

SIF: SIF published an extensive scoping study on nature-related risks in the global insurance sector. Through a
large survey of insurance-sector participants, the study assesses the current status of tools and methods for the
identification, understanding, management and reporting of nature-related financial risks, which are currently all in
premature states.

Regional
The European Central Bank (ECB): The ECB issued its Guidance on Climate-Related and Environmental Risks in
2020, recognising the loss of biodiversity as a source of risk and setting non-binding supervisory expectations
pertaining to climate and environmental risk management and disclosure.

European Banking Authority (EBA): The EBA’s ESG Risk Management Supervisory Report includes guidance on the
way ESG factors and risks, including biodiversity loss, could be included in regulatory frameworks.

National and subnational

Nederlandsche Bank (DNB): The DNB was the first central bank and regulator to highlight biodiversity as a
material financial risk in its study Indebted to Nature, recommending that supervisory authorities develop a
reporting standard and ensure that financial institutions report in accordance with it.

Bank of England (BoE): The BoE is considering whether environmental risks beyond those directly related to
climate change risk give rise to increased financial risk.

Banque de France: Although no firm supervisory expectations have been set by the Banque de France, its own
responsible investment strategy endorses an analysis of an investment portfolio’s impact on biodiversity. Moreover,
a working paper assessed biodiversity-related financial risks in France for the first time in 2021.

Monetary Authority of Singapore (MAS): MAS’ environmental risk management guidelines set out supervisory
expectations pertaining to the risk management and disclosure of environmental risks, including loss of biodiversity,
pollution and land use.

81 NGFS 2022.
82 SIF 2021.
83 ISSB 2022a.
84 ISSB 2022b.
85 CDSB 2022.

Nature and the Insurance Industry: Taking action towards a nature-positive economy 29
 Bank Negara Malaysia (BNM): BNM developed a taxonomy in which biodiversity loss is linked to climate change.
This taxonomy aims to help financial institutions to assess the impact of investing and financing activities on the
health of ecosystems and biodiversity. BNM also led a study exploring the exposure of the economy and financial
industry to nature-related risks, in partnership with the World Bank.

California Department of Insurance: Though not establishing any supervisory expectations, the Climate Insurance
Report of the California Department of Insurance has a strong emphasis on nature and nature-based solutions
and, in particular, promotes the role of the insurance industry and the Insurance Commissioner as catalysts for
developing pilot projects.

Australia Securities Exchange (ASX): The ASX’s Corporate Governance Council’s Corporate Governance Principles
and Recommendations explicitly recommend that an entity should “disclose whether it has any material exposure to
environmental or social risks and, if it does, how it manages or intends to manage those risks”, with their definition
of environmental risks matching the recent TNFD definition of nature-related risks.

BaFin: Although the Guidance Notice on Dealing with Sustainability Risks focuses on climate-related risks,
sustainability risks extend more broadly to all ESG risks, including those pertaining to nature-related risks.
Furthermore, BaFin stresses that other environmental and social trends may also present serious financial risks to
supervised entities.

Source: The Geneva Association86

4.5 Nature-related litigation86 1. The evolving legal landscape, towards value chain
considerations. Laws are shifting towards tighter
As scientific evidence of the impacts of human activity on regulations and increased scrutiny of a company’s
nature continues to grow, similar to climate litigation,87 actions but also those of its value chain partners,
nature-related litigation has started to develop and the with mandatory Human Rights and Environmental
legal landscape is shaping up along two dimensions. Due Diligences (mHREDD) gaining traction, notably
Some claimants are seeking damages to compensate for in the EU.88
environmental or social impairments or to fund abatement
or restoration efforts. Others are using litigation as a tool 2. A growing ability to assess, monitor and quantify
to enable/prevent certain actions or policies or to oppose impacts and hold specific corporates accountable.
them (‘strategic litigation’). Technological, data and scientific advances enable
accurate monitoring and tracking of nature loss. This
is increasingly being utilised to gain insight into the
value chain impacts of businesses, and as evidence in
As scientific evidence of the impacts lawsuits.89
of human activity on nature
continues to grow, nature-related 3. The dynamics and impacts of nature-related
lawsuits. In recent years, a number of nature-related
litigation has started to develop. cases have already impacted corporates, forcing them
to cancel expansion plans, change their operations
and adapt their business strategies.90 Such cases can
enhance the nature litigation movement by raising
A number of factors are influencing the development public awareness and setting precedents. They are
of nature-related litigation and the materiality of the also a source of reputational risk91 and may directly
financial risks it poses. Specifically: affect re/insurers’ stakeholders.

86 Based on the review of: ASX 2019; BaFin 2020; BNM 2021; BNM-World Bank 2022; Banque de France 2021; Svartzman et al. 2021; California
Department of Insurance 2021; China Banking and Insurance Regulatory Commission (CBIRC) 2022; DNB 2020; EBA 2021; ECB 2020; HM Treasury
2021a,b; MAS 2020; NGFS and INSPIRE 2022; NGFS 2022; SIF 2021.
87 The Geneva Association 2021c,d.
88 Some concrete examples of this are France’s 2017 Corporate Duty of Vigilance Law and Article 29 of the Energy-Climate Law, covering expected
disclosures across biodiversity and climate, and Germany’s Supply Chain Due Diligence Law, which will enter into force in 2023.
89 ClientEarth 2021b; Clyde & Co 2022.
90 ClientEarth 2021a.
91 ClientEarth 2021b.

30 www.genevaassociation.org
4. Increasing awareness and scrutiny, reinforced
by disclosures. NGOs and society at large are Current assessments of nature-
increasingly expanding their awareness beyond related risks are largely insufficient
climate change to include nature and biodiversity.
Along with the TNFD’s guidance for systematic compared to the magnitude of
disclosures and the increasing attention of the economy’s exposure, posing a
policymakers and regulators, additional scrutiny
of corporates may occur as their duty of care significant risk to investors.
is enhanced. Just as for climate litigation,92 this
may expose corporates to lawsuits based on
miscommunication, misrepresentation, failure to rating agencies are largely insufficient compared to the
transition towards nature-positive business models magnitude of the economy’s exposure, posing a significant
and ‘nature-washing’.93 risk to investors.

A growing community of researchers is studying litigation A recent study has shown that biodiversity-adjusted
risk in more depth, trying to capture its underpinning sovereign credit ratings could be severely downgraded at
drivers and frame how nature-related liability cases may the country level, e.g. down by six notches for Malaysia, four
impact the financial sector. Although this area is in an for India and two for Brazil, with impacts on their sovereign
exploratory phase, the Commonwealth Climate and Law bonds.100 The study found that in a partial ecosystem
Initiative (CCLI), has gone as far as proposing a framework services collapse scenario, 58% of the 26 most important
that classifies nature-related liability risks and the avenues countries or sovereign entities would face a downgrade
through which claims may impact the financial sector.94 of one notch or more, leading to USD 28–53 billion in
A number of successful nature-based cases have set additional annual interest payment costs. This is driven
precedents and could potentially inspire further strategic by the fact that the economies of developing countries
litigation against corporates and governments.95 receive stronger contributions from sectors with a higher
dependence on nature.101 Rating agencies are progressively
putting mechanisms in place that integrate nature-related
4.6 Corporate, sovereign and municipal risks into companies’ ratings through ESG factors.102
credit ratings
Rating agencies are increasingly aware of nature and 4.7 Growing investor and shareholder
biodiversity loss and their impact on governments and awareness
businesses.96,97 The three largest international rating
agencies (Moody’s, Standard & Poor’s (S&P) and Fitch) are Over the last few years, shareholders and investors have
acknowledging that biodiversity-related risks are rising up become increasingly aware of nature-related issues and
the agendas of companies, investors, policymakers and their interconnections with business models in different
governments, and expect this trend to continue. Some sectors. Indeed, the topic of biodiversity loss is gaining
rating agencies are starting to assess the materiality98 traction among large-scale investors, as evidenced
of these risks at the macroeconomic level, as well through research and innovative solutions103 as well as
as the impacts of companies on nature.99 However, pledges and commitments.104 Yet, the majority of investors
current assessments of nature-related risks by credit are not actually assessing their impact on biodiversity loss,

92 The Geneva Association 2021c,d.

93 The authors of this report have coined this term.
94 CCLI 2020. The financial sector may be hit through first-order impacts as direct defendants of claims, second-order impacts through stakeholders,
and third-order impacts through systemic risks, should their magnitude extend across sectors and geographies. The proposed framework consists
of three overarching categories of liability claims, associated with 1) physical or ecosystem impacts, 2) the transition to a sustainable economy,
and 3) misrepresentation claims.
95 See e.g. ClientEarth 2021a.
96 Moody’s 2021a,b; S&P 2021; Fitch Ratings 2021d,e.
97 Moody’s and S&P are both members of the TNFD.
98 The TNFD definition of materiality is more complex and still evolving. The TNFD believes that the location specificity of nature-related
dependencies and impacts means that the notion of materiality is meaningfully different in the context of nature than that for climate.
99 For example, Moody’s (2021b) finds that 12 sectors of the economy, including all extractive industries like mining, and with USD 2.1 trillion of rated
debt, face high or very high natural capital risk. Regarding impacts, it finds that 38% of 5,300 large, publicly-traded companies have at least one
facility associated with habitat loss (Moody’s 2021a).
100 Finance for Biodiversity Initiative 2022b.
101 Ibid. By applying the findings from Swiss Re 2020a.
102 Moody’s 2021c; Fitch Ratings 2020, 2021a-c; S&P 2022.
103 Responsible Investor 2022.
104 See for instance: Finance for Biodiversity Pledge (https://www.financeforbiodiversity.org/members/); BlackRock 2022.

Nature and the Insurance Industry: Taking action towards a nature-positive economy 31
and some are already being called out for greenwashing
and not fulfilling their climate change commitments.105
The lack of ability to transform intentions into nature-
positive actions may be attributed to four main issues:

• Stakeholders’ general lack of awareness of the

financial implications of nature and biodiversity loss

• The lack of tools and methodologies to assess and

quantify the impacts of a company’s actions on nature
and vice versa

• The lack of data and decision-useful reporting on

nature- and biodiversity-related risks

• Challenges with identifying nature-related

opportunities.

However, as these issues are addressed over time, nature

and biodiversity loss and the need for nature-positive
activities are expected to become core considerations for
investors and shareholders.106

105 E.g. The global network of NGOs, social movements and advocates, ‘BlackRock’s Big Problem’, is regularly pointing out the inconsistencies and
inaction of major asset managers.
106 Credit Suisse and Responsible Investor 2021; Robeco 2022a,b.

32 www.genevaassociation.org
 5. The insurance industry
and nature-related risks
and opportunities

Healthy nature offers a wide range of public goods such as clean air, fresh water,
fertile soil, sustainable natural resources and climatic conditions, which are
foundational to quality of life, livelihoods and socio-economic sustainability.107

The Chief Risk Officer (CRO) Forum identifies nature and biodiversity loss as an
emerging, ‘medium category’ environmental risk for re/insurers, with significant
potential impacts expected within the next five years. In 2022, climate engineering,
including risks of carbon capture and underground storage technologies, was also
added as a ‘medium category’ risk in their Emerging Risk Radar (Figure 3).108

Nature and biodiversity loss are expected to

significantly impact re/insurers within the next five
years.

Discussions with 25 re/insurers conducted for this report revealed that some have
been addressing nature- and biodiversity-related risks by:

• Supporting innovative research to quantitatively assess the benefits of nature-

based solutions for increasing community resilience to physical climate risks
and serving as carbon sinks109

• Developing tools to assess the impacts of nature loss on society110

• Innovating insurance products for the protection of nature-based solutions (see

section 5.2.1)

• Investing directly in nature-based solutions (see section 5.2.2)

• Supporting initiatives such as the TNFD to develop methodologies for defining,

assessing and disclosing the financial risks associated with nature loss.111

107 Dasgupta 2020.

108 CRO Forum 2022.
109 MNHN and SCOR 2021; Swiss Re Institute 2021; Swiss Re 2020a; AXA Research Fund 2022; AXA
2019.
110 Swiss Re 2020a. This tool is available to Swiss Re clients and upon request to other parties.
111 TNFD 2022a-c.

Nature and the Insurance Industry: Taking action towards a nature-positive economy 33
Figure 3: CRO Forum Emerging Risk Radar 2022 – A reflection on biodiversity loss and climate engineering risks

SO
CIA
L L/
NTA PO
E LI
M Endocrine
N

TI
Climate engineering disruptors
RO

CA
(incl. carbon capture Resource and
VI

L/
storage)* supply management Metabolic
EN

EC
syndrome

ON
Space risk in lower

OM
Earth orbit*
Climate change:

IC
Environmental transition risk Passive
pollution investment
Skills shortage Growth of
and reskilling leverage
Antimicrobial Biodiversity Emerging
resistance loss infectious
Evolving terrorism
diseases

Climate Geopolitical Mental

change: conflicts health
Autonomous physical risk Supply chain Medical
machines complexity advance
Critical
Cyber
infrastructure Monetary
risks
blackouts policies Substance
Small particles Socio- abuse
Legal &
and hazardous economic regulatory
chemicals inequality uncertainty
Digital
currencies
Collective
Genetic Digital
Artificial redress
engineering misinformation
intelligence
TE

AL
CH

EG
NO

O /L
RY
GI
L

O
CA
LAT
L
GU
RE

Trends Keys

Shifting Impact assessment

Ageing and
geopolitical
health concerns Risk category:
landscape
l High
l Medium
Economic Technological
instability developments and l Low
impacts on society
Time horizon:

l Significant impacts already seen on the

Environment Demographic and
and climate social change insurance sector
l First significant potential impacts on the
insurance sector expected within 1–5 years

ESG Issues l First significant potential impacts on the

insurance sector expected within 5–10 years

* New risk in 2022

Source: CRO Forum112

112 CRO Forum 2022.

34 www.genevaassociation.org
However, nature-based risks and opportunities remain These risks could impact re/insurers in a variety of ways:
primarily a scientific and environmental issue for most
companies. 1. Underwriting113

Over the last decade, research supported by the insurance • For P&C re/insurers, nature risks directly impact
industry has highlighted the benefits of nature-based their business models by modifying the resilience
solutions to reduce existing – or prevent new – physical of their customers to extreme events. For example,
and transition climate risks. This research has also allowed the 2017 storm damage to coral reefs in Florida and
the value of the increased resilience and the carbon Puerto Rico by Hurricanes Irma and Maria increased
sequestration benefits provided by nature to be captured flood risk by more than USD 180 million annually.114
in monetary terms.
Rising large-scale nature loss and pollution impact
Re/insurers could experience nature-related risks through commercial lines such as agribusiness, construction
four main channels (Figure 4): and engineering, marine and aviation, with
potentially rising litigation against corporations
1. Societal vulnerability to physical climate risks, disease in these sectors and subsequent implications for
transmission, health issues and pandemics re/insurers underwriting in areas such as general
liability, Directors and Officers (D&O), professional
2. Direct and indirect impacts on insureds and investees indemnity and Errors and Omissions (E&O)
with unsustainable business models and supply chains insurance. In some cases traditional environmental
insurance is being used to fund environmental
3. Secondary impacts of unsustainable development restoration and improvement projects.
approaches of governments
Discussions with members of the GA Emerging
4. Reduction in GHG sequestration. Environmental Risk Advisory Committee indicated
that initial risk assessment services with a
preventive lens performed by underwriters,
Figure 4: Four ways nature-related risks impact biodiversity experts and engineers can help identify
re/insurers potential environmental risks and assist customers
with identifying and putting risk management
measures (e.g. emergency preparedness measures,
preventive procedures, safety devices) into place.
Vulnerability to extreme weather, The rapid deployment of response contractors,
disease transmission etc. biodiversity experts and engineers could also help
to minimise the impacts on nature-based systems,
post-incident. Finally, Supplemental Environmental
Reduction in GHG sequestration Projects (SEPs) are commonly used in settlements
GHG capacity, compromising net-zero between regulatory agencies and alleged violators,
targets where the latter agree to provide tangible
environmental or public health benefits.115

Unsustaianble business models

of insureds and investees
Nature risks directly impact P&C
Secondary impacts of poor re/insurers’ business models by
public-sector development modifying the resilience of their
choices and urbanisation
customers to extreme events.
Source: The Geneva Association

113 CISL 2022b, MNHM and SCOR 2021.

114 United States Geological Survey 2021; Storlazzi et al. 2021.
115 For examples see: https://www.epa.gov/enforcement/supplemental-environmental-projects-seps.

Nature and the Insurance Industry: Taking action towards a nature-positive economy 35
 • For life insurers, there is growing evidence 3. Impacts on real assets and operations
of the link between nature-based risks and air
pollution, food security and malnutrition, increased This may be linked to a rise in physical risks to assets,
transmission of vector-borne diseases and even buildings and staff due to large-scale nature loss in
pandemics. More research is needed to explore specific regions.
the materiality of nature and biodiversity loss on
longevity,116 mortality and morbidity for life and 4. Risk assessment, modelling and pricing capabilities
health re/insurers. Particular attention should be
given to the databases used by life insurers, as the The ability to assess and quantify nature-based risks
causes of illness and death given in claims data are requires forward-looking tools. Re/insurers have
usually linked to a human condition rather than the over 35 years of experience in NatCat modelling.118
underlying source, which may be linked to nature. Moreover, the insurance industry is currently
supporting initiatives to develop forward-looking
2. Investments climate change risk assessment tools.119 Building
on these and the growing amount of research on
The financial performance of assets is directly impacted the benefits of investing in nature-based solutions,
by physical climate risks (rising extreme weather risks the insurance industry is in a unique position to
linked to climate change and the degradation of natural develop new tools and databases. This is necessary
ecosystems), transition risks (credit, market, policy to review existing products and services and identify
and regulatory risks), litigation risks and the ability opportunities for offering new ones, for example:
to transition to a nature-positive economy.117 This is
particularly relevant for life insurers given the long- • For pricing and offering insurance solutions to cover
term characteristic of their investments. nature-based systems directly

• For assessing how the protection of nature-based

systems will impact existing risks associated with
current property lines of business and investments,
as well as the company’s net-zero targets

116 For life insurance, risk assessment is based on a given mortality rate, the evolution pattern of health risks and a health check. Biodiversity loss is
an increasing factor in health issues. The lack of diversity in diets can cause malnutrition leading to health issues, diseases and premature deaths.
It has been established that air pollution is responsible for 3.3 million premature deaths each year (IPBES 2019e) and biodiversity loss can increase
the spread of vector-borne diseases, such as malaria or zika (IPBES 2019e), with an increasing prevalence due to climate change. If not taken into
account by life insurers, risk assessments and risk pricing might increasingly be underestimated, affecting profitability.
117 MNHM and SCOR 2021.
118 The Geneva Association 2018. Author: Maryam Golnaraghi.
119 The Geneva Association 2021a,b, 2022.

36 www.genevaassociation.org
 • To help commercial and public-sector customers 5.1 Opportunities for re/insurers
transition to more sustainable business models and
minimise their own nature-related risks. Acting now can reduce current and future exposure to
nature-related risks and lead to business opportunities;
An example of a current tool is the Swiss Re Institute delaying action could exacerbate the risks to a point of no
Biodiversity and Ecosystems Services Index (Swiss Re return. Re/insurers could encourage behavioural changes for
BES Index),120 which is designed to map the exposure of the preservation, restoration and management of nature,
economic activities to biodiversity and natural ecosystem and support their insureds and investees to develop more
services. The index is also relevant for corporates resilient, GHG-neutral and nature-positive business models.
and governments looking for re/insurance, as well as
screening locations to inform investment exposure
to BES degradation. Importantly, the index can be Re/insurers have an opportunity to
aggregated at both country and economic-sector levels
for macroeconomic analysis, by combining it with other help increase the resilience of their
tools and databases such as ENCORE. This allows the links clients through underwriting and
between sector dependency and the impacts on ecosystem
services to be captured, as well as the importance of specific
investing in nature-based solutions.
sectors in a given country, thereby providing a macroview of
country-specific GDP dependency on ecosystem services.
Re/insurers have an opportunity to increase the resilience
of their clients through underwriting and investing
in nature-based solutions.121 In this section, we offer
examples of innovation in insurance products, services and
investment strategies (Figure 5).

Figure 5: Opportunities for re/insurers to support a nature-positive transition

LIABILITY SIDE INVESTMENT SIDE

1 1
Insuring nature-based solutions Investing in the restoration
to enhance community and conservation of
resilience to physical climate nature-based solutions to
risks realise increased resilience
and carbon credit benefits

2
Insuring nature-based solutions 2
with win-win benefits of carbon
credits and resilience Developing investment
strategies to support
sustainable business
3 practices
Innovation in insurance products
to incentivise sustainable
business solutions for their
insureds

Source: The Geneva Association 2.

120 Swiss Re 2020a. This tool is available to Swiss Re clients and to others upon request.
121 Beck et al. 2022; ICCA and University of Waterloo 2021.

Nature and the Insurance Industry: Taking action towards a nature-positive economy 37
5.1.1 Innovations on the liability side

Insuring nature-based solutions to enhance community resilience to physical climate risks

Wildfire resilience insurance: Risk reduction through ecological forestry

The Nature Conservancy and Willis Towers Watson joined

forces to demonstrate how insurance combined with
ecological forest management, which reduces the risk
of severe wildfires in fire-adapted forests, can reduce
insurance costs significantly.

Forests cover about 33 million acres in California – about

one third of the state’s land area – and more than 2.7
million Californians live in very high wildfire hazard
severity zones. Northern California saw record losses in
excess of USD 10 billion in 2017 and 2018.122

Taking into consideration land ownership and stakeholders

in forestland in California, the study analysed the risk
reduction benefits and premium savings associated with
ecological forestry for a range of parametric wildfire
insurance structures. Parametric insurance for wildfire risk could pay out when a certain threshold of ‘acres burned’ is
exceeded, as opposed to traditional indemnity insurance where the insured has to prove that it suffered damage and loss to
insured assets. It can provide quick access to funds to pay for costs not covered by indemnity insurance, such as heavy debris
removal, sediment removal and/or erosion and sediment mitigation expenses.

The findings indicate that ecological forestry practices can lead to significant insurance premium savings. For parametric
insurance it resulted in 10–80% reductions across all modelled scenarios, and 20–40% reductions for case study
scenarios consistent with the scale of the French Meadows ecological forestry project. This could cover various fire-related
costs for a water and power agency or for a timber company, for example, as well as reducing the cost of traditional
indemnity insurance for commercial and residential structures vulnerable to wildfires.

The study also examines how insurance premium savings might be used to fund or finance additional investments in
ecological forestry in national and other forest lands, thereby maximising the potential of California’s extensive forests to
help mitigate climate change.

Source: Lerner, The Nature Conservancy and Willis Towers Watson123

122 Previously, the only event in Northern California to exceed the billion‐dollar insured loss threshold was the Tunnel Fire of 1991, with insured losses
of USD 1.7 billion.
123 Lerner 2021; The Nature Conservancy and Willis Towers Watson 2021.

38 www.genevaassociation.org
Insuring coral reefs and other ecosystems that protect communities

Coral reefs, one of the most biologically diverse

ecosystems on earth, can reduce up to 97% of wave
energy before it reaches the shore, thus increasing the
resilience of coastlines, businesses and communities to
storms and erosion. In addition to coastal protection,
many coastal communities rely on reefs for tourism,
fisheries and sustenance. However, hurricanes can damage
coral reefs, diminishing their ability to protect valuable
coastal infrastructure.

The Nature Conservancy (TNC), the Government of

Quintana Roo, and the National Commission of Protected
Areas (CONANP) worked with Swiss Re to establish the
world’s first insurance policy for a natural asset by insuring
a coral reef in Quintana Roo, Mexico. The parametric
insurance coverage has three key elements:

• The parameter (wind speed) and the threshold (e.g. 100 knots) that triggers the insurance

• The geographic area concerned

• The payout scheme to the policyholder

This parametric insurance supports the rapid repair of hurricane damages, helping to protect and restore these biological
habitats and support the communities relying on them.

Policyholders may be planning authorities, tourism departments or environment and fisheries agencies, who may hold a
legal mandate and authority to carry out reef restoration work, or private-sector hospitality and hotel chains or fisheries
that directly benefit from the increased resilience related to healthy natural ecosystems.

TNC is now working with partners to scale this model to new geographies, ecosystems and risks. The model has been
adopted by and adapted to other areas, such as by the Mesoamerican Reef (MAR) Fund and the Governments of
Honduras and Belize, and the first insurance product for nature in the U.S. is under development – a reef insurance policy
for hurricanes in Hawaii. To expand this novel tool to new ecosystems, TNC is assessing the feasibility of insurance for
mangroves in the Caribbean and for salt marshes in California and Georgia. TNC has also explored the feasibility of
insurance for risks such as coral bleaching, sedimentation and excessive rainfall in Hawaii.

Recent work by the UN Development Programme (UNDP), in collaboration with the Ocean Risk and Resilience Action
Alliance (ORRAA) and key insurance industry stakeholders, has identified solutions for securing natural capital and risk
financing mechanisms for coral reefs.

Source: Contributed by Tamaki Bieri, Kim Hum, Eric Roberts and Fernando Secaira (TNC)124

124 Based on Zepeda-Venteno et al. 2018; The Nature Conservancy 2020a,b; The Nature Conservancy and Quintana Roo Government 2021; and
UNDP 2022.

Nature and the Insurance Industry: Taking action towards a nature-positive economy 39
Insuring nature-based solutions that offer carbon credits and increased resilience

Blue Carbon: Insuring the buffer to unlock greater finance

The world has set ambitious goals toward limiting

planetary warming to 1.5°C. Blue carbon systems
(mangroves, seagrasses and saltmarshes) are the Earth’s
most carbon-dense ecosystems. Carbon markets can help
blue carbon systems realise their potential as a climate
change solution.

Conservation International and partners have made

blue carbon credits possible as a finance mechanism
for on-the-ground coastal conservation and restoration
initiatives, which provide climate mitigation, adaptation,
biodiversity and community benefits. Projects trade these
credits on compliance or voluntary platforms and reinvest
the payments into on-the-ground activities.

However, current certification processes require an allocation of ‘buffer credits’ to cover the non-permanence-related risk
associated with projects. Credits allocated to the buffer pool are not eligible for trade, thus reducing the project’s funding.
In partnership with Swiss Re, Conservation International has been exploring insurance as a potential alternative to aspects
of the buffer system. The insurance covers the loss and damage to the asset (e.g. mangroves) from unexpected natural
and weather-related events that result in reduced carbon benefits, which may negate the need to set aside a portion of
the buffer credits related to those specific risks. Instead, a premium would be paid by the project proponent, which is
ideally less than the equivalent buffer credit value. The difference in premium cost and gained carbon credit value could
unlock greater finance for the project and allow for more credits to enter the market where they can be applied to climate
commitments by governments or toward corporate carbon footprints.

Source: Contributed by Jennifer Howard (Conservation International) and Cherie Gray (Swiss Re)

40 www.genevaassociation.org
Innovative insurance products that incentivise sustainable business solutions

Insuring mass timber: A new class of building materials

As the building sector transitions towards a sustainable

economy, there is a need for low-carbon, sustainable and
yet high-quality, safe, solid and aesthetically pleasing
building materials. Perhaps surprisingly, an innovative
solution originates from wood: mass timber is a new class of
engineered building materials fabricated from layers of wood.

Importantly, mass timber’s characteristics come with a

number of environmental benefits:

• Using it reduces the amount of concrete and steel

needed in structures, making the overall structure
lighter. This may reduce foundation requirements and
shorten project schedules.

• Buildings with mass timber may be more resilient and

perform better against seismic stresses.

• The manufacturing process reduces GHG emissions compared to equivalent concrete and steel structures, cutting
emissions by up to 25–40%.

• For the duration of the building’s lifetime, wood will sequester carbon.

Combined, all of these advantages make mass timber an innovative alternative to today’s large-scale building materials.
To enable the use and growth of mass timber, Zurich Insurance expanded its ‘builders risk’ coverage, offering up to
USD 50 million in capacity for commercial construction projects using mass timber. The new Mass Timber Builders Risk
proposition is available either as a standalone solution, or incorporated as part of a master Builders Risk programme.
Through this new product, Zurich shows how insurance can enable a nature-based solution to incentivise more
sustainable, environmentally-friendly and yet economically competitive products.

Source: Zurich North America125

125 Zurich North America 2021.

Nature and the Insurance Industry: Taking action towards a nature-positive economy 41
5.1.2 Innovations on the investment side

Investing in the restoration and conservation of nature-based solutions for increased resilience

The Nature Force

The Nature Force is an action-oriented, climate resilience

initiative funded by a collective of 15 P&C insurance
companies (Aviva Canada, can Canada, Definity, Gallagher,
Gore Mutual, HUB International, Intact, Navacord,
Northbridge, SGI, Travelers Canada, Trisura, Wawanesa,
Westland and Zurich Canada) in partnership with a
national non-profit conservation organisation, Ducks
Unlimited Canada, to invest in nature-based solutions,
including upstream wetlands in high flood risk urban areas.
The industry significantly benefits through the reduction
of flood risk to people, communities and businesses.

Source: The Nature Force 2022126

Development of investment strategies to support sustainable business practices

Integrating a sustainable investment strategy for agriculture and timber

Managing, preserving and restoring forests and related

land for agriculture is crucial for both biodiversity and
climate change mitigation. Hancock Natural Resource
Group (HNRG) has adopted a sustainable approach to
investing in agriculture and timber, focusing on positive
climate impacts and regenerative agricultural practices
that can improve soil health and biodiversity.

The Sustainable and Responsible Investing (SRI)

framework of HNRG, a company of Manulife Investment
Management, is centred around five themes: 1) climate
stability, 2) ecosystem resiliency, 3) watershed protection,
4) people empowerment, and 5) community prosperity.

Importantly, HNRG adopted a systematic and thorough

materiality assessment of SRI issues, involving key
stakeholders (e.g. the investors) and peers to enhance the process. A rigorous SRI Due Diligence Toolkit is used from
a preliminary stage to the final valuation of a deal. The entire approach allows a careful assessment of the risks and
opportunities associated with each investment, with a long-term view.

Source: HNRG and Manulife Investment Management127

126 The Nature Force 2022.

127 HNRG 2021; Manulife Investment Management 2021.

42 www.genevaassociation.org
5.2 The challenges of scaling up • Standard approaches for assessing the financial risks
nature-related underwriting and and opportunities associated with the protection
and preservation of nature and biodiversity (in line
investing with the TNFD)
While protecting and restoring nature is an urgent matter,
markets and activities need time to take off and create • Accessible data and tools to allow the assessment
demand and supply for insurance products that support of nature and biodiversity loss on business models
nature-positive approaches. We highlight four key challenges (dependencies and impacts). Similar to climate
towards scaling up these opportunities (Figure 6). change,128 capacities for developing decision-
useful nature loss risk assessment will need to be
1. The general perception of nature and biodiversity. developed with a forward-looking approach
Despite rising evidence about the impacts of
human activity on nature and biodiversity loss, the • More research to develop these capacities to
misperception among some governments, businesses identify and integrate nature-related risks into the
and the general public that nature may be exploited decision-making of governments, companies, their
for free persists. Some corporations, investors and investors and insurers.
re/insurers may consider nature-related risks and
opportunities as a scientific, environmental and, at Examples of existing tools are provided in Box 7. Much
most, a philanthropic or corporate social responsibility work lies ahead to develop and extend these capacities
issue. Furthermore, as nature-positive activities and so they can serve as an integral part of companies’ risk
investments are not correctly priced, they currently assessment toolbox.
carry extra premiums, which few stakeholders may be
willing to pay. Addressing the challenges related to the availability of
data, methodologies and tools for nature-related risk
2. Identifying customers who could benefit from assessment in insurance will require the industry to
insurance products targeted at the protection capitalise on its extensive experience in the field of climate
of nature-based systems and who are willing change risk assessment. Combined with industry-level
to purchase them. Customers may be individuals, collaboration, this will help to:
public or private entities or a quasi-public entity
that purchases on behalf of many individuals and/or • Expedite the development of such methodologies
entities. Despite short-term extra premiums, many
stakeholders stand to benefit from investments • Capture the interlinkages of nature and climate
in nature-related activities over the long term. change with a more integrated approach to risk
Identifying and engaging with these customers modelling
is essential to developing product offerings. For
example, hotel chains along coastlines, whose • Build stronger collaboration with regulatory bodies
property will be protected from floods and storms through sharing expertise to shape future regulatory
by healthy wetlands, mangroves and reefs, should developments in this area.
reassess and consider the value of healthy nature in
terms of reducing risk, as potential insurable assets 4. Policy and regulatory issues and the role of
and services that support their business. In some governments in enabling and investing in nature-
cases, sources of funding to pay for the policy may be based solutions. Given the lack of market and
an issue. price signals, the public sector plays a critical role in
the protection and conservation of natural capital
3. The availability and accessibility of data and tools through public policy and regulatory requirements
to quantify the risks and benefits associated as well as incentivising investments in nature-
with nature-based systems. This could be a based solutions. For example, from 3 July 2021, EU
critical bottleneck for taking innovative action. The member states banned single-use plastic plates,
lack of consideration for nature is exacerbated by cutlery, straws, balloon sticks and cotton buds from
the difficulties in valuing and pricing the risks and their markets in an effort to combat plastic waste
opportunities. Quantifying the value of nature’s and pollution.129 Governments could also consider
protection in monetary terms is crucial to help investing in nature-based solutions. For example, the
re/insurers, investors and corporate clients understand draft EU’s Nature Restoration Law is an ambitious
the value and integrate it into decision-making. This plan for the preservation and restoration of nature,
would require: with legally binding targets. The EU Commission set

128 The Geneva Association 2021a,b, 2022.

129 European Commission 2019.

Nature and the Insurance Industry: Taking action towards a nature-positive economy 43
 Box 7: Examples of databases and tools for assessing the financial risks of nature and
biodiversity loss
GLOBIO was developed by the PBL Netherlands Environmental Assessment Agency, with the aim of quantifying
global human impacts on biodiversity and ecosystems. Initially designed to inform policymakers, the IPBES and
the CBD, GLOBIO has also been used by financial institutions to assess the impacts of nature loss and biodiversity
footprints.

ENCORE was developed by the Natural Capital Finance Alliance in partnership with UNEP-WCMC. It guides users
in understanding how businesses across all sectors potentially depend and impact on nature, and how this might
translate into a business risk.

The Cambridge Institute for Sustainability Leadership (CISL) is working with a number of financial institutions
to develop a framework for identifying nature-related financial risks for the financial sector, allowing companies to
assess the materiality of certain nature-related risks on their business.

The Partnership for Biodiversity Accounting Financials (PBAF) is an international partnership of banks, asset
managers and investors and a sister initiative to the Partnership for Carbon Accounting Financials (PCAF) related to
climate change. The PBAF aims to offer new standards for financial institutions to measure the impact of loans and
investments on biodiversity.

Source: The Geneva Association130

an overarching target to restore at least 20% of the EU’s land and sea area by 2030 and plan to extend it to all
ecosystems in need of restoration by 2050.131 In 2021, as part of a CAD 4 billion investment over 10 years in
the Natural Climate Solutions Fund, the Government of Canada announced a CAD 25 million investment in the
conservation, restoration and management of wetlands and grassland habitats in the Prairies.132

Collaboration within and across sectors and opportunities for public-private partnerships, financing and risk sharing
solutions need to be further explored.

Figure 6: Challenges of scaling up action towards nature-positive activities

Perception

Identifying Market Quantifying and

customers and conditions and valuing nature loss
stakeholders development and benefits

Policy and
regulatory
issues

Source: The Geneva Association

130 Based on the review of: Schipper et al. 2019; SCOR 2020; Natural Capital Finance Alliance 2018; CISL 2022a; CISL and Robeco 2022; CISL and UBP
2022; CISL and HSBC 2022; CISL and NatWest Group 2022; CISL and Aon 2022; PBAF 2022a-c.
131 European Commission 2022.
132 Government of Canada 2021.

44 www.genevaassociation.org
 6. Recommendations

Considering the latest scientific evidence on the direct, large-scale impacts of

human activity on nature-based systems and their subsequent socio-economic
impacts, we anticipate a paradigm shift in societal perceptions of nature-related
risks over the next few years.133 We offer the following recommendations to the
global research community, re/insurers, governments and policymakers.

Research community

Tackling this complex global crisis will require more multi-stakeholder applied
research, with more coordinated funding from the private and public sectors as well
as philanthropic sources. There are five key areas where research needs to be scaled
and expedited:

1. Defining and classifying nature-related risks and their interlinkages;

identifying critical indicators on which to base mitigation actions; and
establishing measurable ways to define their impacts. For example, for
climate change, the clear metric of carbon (and other GHG) emissions provides
a global measuring stick on which to base actions. Given the complexity and
myriad factors driving nature loss, there is currently no clear corresponding set
of indicators.

2. Quantifying the benefits of nature-positive activities for strengthening

resilience to physical climate risks, expediting climate change mitigation
and enabling sustainable, nature-positive business models in different
sectors.

3. Understanding, assessing and mapping the types and scale of

environmental footprints of full value chains. As the world moves to
invest at scale in a wide range of new climate technologies for sectoral
decarbonisation, environmentally sustainable industrial and development
practices need to be considered. Research should be conducted with a circular
economy lens, exploring environmental footprints across the value chain on
a technology-by-technology basis (e.g. exploration and extraction of rare
materials, intermediate processing (e.g. batteries), advanced manufacturing
and assembly of components, recycling (e.g. materials used to manufacture
batteries) and disposal).

4. Establishing best practices for assessing the materiality of risks of

large-scale biodiversity and nature loss. This will require companies from

133 Similar to the shift in perceptions of climate change, in the past several years, since the launch of
the TCFD recommendations.

Nature and the Insurance Industry: Taking action towards a nature-positive economy 45
 various sectors to engage in global initiatives such Re/insurers can engage in global efforts such as
as the TNFD and invest in relevant research and the TNFD to identify methodologies, share lessons
development. learned and help expedite convergence towards
best practices. This will also allow them to initiate
5. Improving the availability and accessibility of internal discussions around the risks and opportunities
data and tools to enable the quantification of the associated with nature-based systems in relation
risks and benefits tied to nature-based systems. to their core business and further enhance internal
Unaddressed, this could be a bottleneck to innovative awareness.
actions. Building on the above research, there is a
need for inter and intrasectoral coordination and 4. Further explore the interlinkages of nature-
collaboration to develop methodologies for forward- based solutions and climate change adaptation
looking nature-based risk assessment, also taking and mitigation measures. Addressing nature and
into consideration the interlinkages with climate biodiversity loss together should be an integral part
change, to produce decision-relevant information to of companies’ net-zero transition strategies. Realising
underpin future actions. Efforts in this area can benefit the benefits of nature-based solutions should be
from and leverage current industry collaborations on central to companies’ approaches to developing more
climate change risk assessment.134 resilient, carbon neutral and nature-positive business
models.
Re/insurers
5. Raise awareness among insureds and investees
Risk is the raison d’être of the insurance industry, and risk about the scale of nature-related risks and biodiversity
assessment is already deeply embedded in organisations’ loss to incentivise more sustainable behaviours
risk management, underwriting and investment processes. and business models. As re/insurers build a deeper
While some re/insurers have already started on their understanding of nature-based risks and how they
journey to assess, understand and quantify the risks and transmit, they have an opportunity to offer risk
opportunities related to nature-based systems through expertise and related services to their clients in fields
investing in research and development, raising awareness where standard insured risks are connected to climate
and innovating new solutions, the industry can go further change or the decline of nature and their interactions.
by helping to shape more nature-positive behaviour. We
recommend that companies: 6. Explore opportunities for new product and service
innovation to mitigate nature loss and its impacts.
1. Stay abreast of the latest research, as well as This may have implications for risk analysis and the
invest in relevant research and development, in this pricing and development of more integrated insurance
area. Engage in company-wide discussion and raise solutions. In this regard, it is important to consider
awareness among the board, executive management the interactions, feedback loops and competing
and employees regarding the risks and opportunities interests of various industries around nature and
associated with nature-based systems. climate change, and engage with other sectors such as
banking, IT and digital communications to assess and
2. Recognise and keep pace with the latest price these risks.
developments in areas that are driving nature-related
risks and opportunities into core business decision- 7. Consider the environmental risks associated
making. These include emerging sustainable finance with producing new climate technologies for
frameworks,135 regulatory and supervisory actions, decarbonisation when underwriting and investing in
the litigation landscape, the incorporation of nature- their large-scale deployment. These technologies may
related factors in credit ratings, the environmental come with significant environmental and disposal
and sectoral public policy and regulatory landscape; risks. Gone unmanaged, these may also lead to
and the sensitivity of investors and shareholders to financial and reputational risks to organisations, as
these issues. well as litigation risk.136

3. Explore, identify and assess the materiality of 8. Identify and potentially realise investment
nature-related risks in their business model. This opportunities in nature-based solutions that would
will take time, but it is important for shaping future lead to increased resilience and carbon credit benefits
strategies, policies and business models. for clients and their own business models.

134 The Geneva Association 2021a,b, 2022.

135 UNEP-FI 2019.
136 In the U.S., a number of litigation cases have been brought against developers and operators of large-scale wind and solar farms. Golnaraghi 2022;
The Geneva Association 2021c,d.

46 www.genevaassociation.org
9. Recognise the shortfalls in the availability and 3. Acting on, purchasing insurance for, and investing
accessibility of data and tools to quantify the in the restoration and preservation of nature-based
risks and benefits tied to nature-based systems. systems. By purchasing insurance, governments
Consider industry-level collaboration and proactive can strengthen community resilience to nature
engagement with regulatory bodies to identify loss. Direct investments in nature-based solutions
major data gaps and expedite the development of should be integral to governments’ climate change
forward-looking methodologies for nature-related risk adaptation and mitigation strategies. Governments
assessment. from emerging and low-income economies could
collaborate with the international development
Governments and policymakers community and multilateral development banks to
boost nature-based investments.137
Given the lack of price signals and market considerations
of nature, the public sector must take the lead in 4. Making considerations for the preservation
educating society about the harms of nature and and restoration of nature-based ecosystems a
biodiversity loss and incentivise action towards more requirement for future development plans. Resilient
sustainable approaches by: and sustainable infrastructure and community
development projects should consider the valuation
1. Committing more funding to coordinated multi- of nature-based ecosystems.
stakeholder research.
5. Considering public-private partnerships and
2. Considering policy and regulatory frameworks opportunities, for example with the insurance
that incentivise nature-positive behaviour and industry for risk assessment and risk management, as
business models. Sectoral and environmental policy well as broader engagement with the private sector
and regulatory frameworks can play a critical role in for co-financing and risk sharing.
changing unsustainable behaviours (e.g. consumption
patterns) and corporate business models. Further
developing sustainable finance frameworks is another
critical step towards institutionalising long-term,
nature-positive investment approaches.

137 For example, since 2021, the Inter-American Development Bank leads multilateral development banks to boost nature-based investments
(Inter-American Development Bank 2021).

Nature and the Insurance Industry: Taking action towards a nature-positive economy 47
Appendix: Nature- and climate
change-related terminology138

Nature-related terminology:

Biodiversity: The variability among living organisms from Nature: The natural world, with an emphasis on the
all sources, including, inter alia, terrestrial, marine and diversity of living organisms (including people) and
other aquatic ecosystems and the ecological complexes of their interactions among themselves and with their
which they are part; this includes diversity within species, environment.
between species and of ecosystems.
Nature-based solutions: Actions to protect, sustainably
Ecosystem: A dynamic complex of plant, animal manage and restore natural or modified ecosystems that
and microorganism communities and the non-living address societal challenges effectively and adaptively,
environment, interacting as a functional unit. simultaneously providing human well-being and
biodiversity benefits.
Ecosystem services: The contributions of ecosystems to
the benefits that are used in economic and other human Nature positive: A high-level goal and concept describing
activities. a future state of nature (e.g. biodiversity, ecosystem
services and natural capital) which is greater than the
Materiality: Generally refers to being relevant or current state.
statistically significant. Materiality definitions in the
context of financial risks associated with climate change Systemic risk: Risks arising from the breakdown of the
and nature-loss are being addressed by the TCFD and entire system, rather than the failure of individual parts.
TNFD, respectively. Characterised by modest tipping points combining
indirectly to produce large failures and cascading
Nature-related financial risks: Potential threats posed interactions of physical and transition risks (contagion), as
to an organisation linked to its and other organisations’ one loss triggers a chain of others and stops systems from
dependencies on nature and nature impacts. These can recovering their equilibrium after a shock.
derive from physical, transition and systemic risks.
System-based thinking: Holistic approach focusing on
Physical risk: Risks arising when natural systems the way the system’s constituent parts are interrelated
are compromised, due to the impact of climatic (e.g. with feedback loops as the system works overtime.
extremes of weather) or geologic (e.g. seismic) events
or changes in ecosystem equilibria, such as soil quality Climate-related terminology:
or marine ecology. These can be event driven (acute),
chronic or both. Physical risk: The potential negative financial impacts
that could arise from direct physical effects, such as the
Transition risk: Risks that result from a misalignment destruction of property and infrastructure, and indirect
between an organisation’s or investor’s strategy and impacts, such as business or supply chain interruptions,
management and the changing regulatory and policy due to the increasing severity and frequency of extreme
landscape in which it operates. Developments aimed weather events (acute risks) and long-term shifts in
at halting or reversing the damage to nature, such as climate patterns (chronic risks) caused by climate change.
government measures, technological breakthroughs,
market changes, litigation and changing consumer
preferences can all impact risks.

138 TNFD 2022.

48 www.genevaassociation.org
Transition risk: Any risk which could result from the
process of transitioning towards a low-carbon economy.
The TCFD notes that transitioning to a lower-carbon
economy may entail extensive policy, legal, technology
and market changes to address mitigation and adaptation
requirements related to climate change. Depending on the
nature, speed, and focus of these changes, transition risks
may pose varying levels of financial and reputational risk
to organisations.

Litigation risk: Cases brought before administrative,

judicial and other investigatory bodies, financial
supervisory authorities and ombudsman schemes or in
domestic or international courts and organisations, that
raise issues of law or facts regarding the science of climate
change and climate change mitigation and adaptation
efforts. Note that the definition of litigation risk used here
goes beyond that of the TCFD definition to include cases
that can be directly linked to physical risk.139

139 The Geneva Association 2021c.

Nature and the Insurance Industry: Taking action towards a nature-positive economy 49
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Nature and the Insurance Industry: Taking action towards a nature-positive economy 59
60 www.genevaassociation.org
Nature and the Insurance Industry: Taking action towards a nature-positive economy iii
This report provides the latest scientific evidence on the impacts of human activity on nature and their
socio-economic implications, laying out the challenges and opportunities facing re/insurers and how
they, as risk managers and investors, can support the development of a nature-positive economy and
incentivise sustainable business models. It also explores the profound inter-connectivity between nature
loss and climate change in terms of both risks and solutions and highlights seven factors that are driving
nature-positive considerations into core business decision-making in insurance.

The Geneva Association

International Association for the Study of Insurance Economics
Talstrasse 70, Zurich, Switzerland
Tel: +41 44 200 49 00
www.genevaassociation.org