How can the insurance industry zero in on net zero?

Just like the rest of financial services, the insurance industry has a critical role to play in enabling the net zero transition. How can the industry help (and incentivise) policyholders to decarbonise their assets and activities? What innovation is needed in the underwriting process to enable net zero business models, technologies, and lifestyles? And how can the broader insurance value chain play its part for a more rapid transition?

Together with ClimateWise (convened by the University of Cambridge Institute for Sustainability Leadership) and Icebreaker One, we have published “Climate product innovation within the insurance sector” which addresses these questions, and more.

“Through innovation to de-risk the transition and low carbon solutions, the insurance industry can play its part in creating the services and products demanded by the wider economy as it decarbonises. Driving this agenda forward will require new ways of thinking and an engaged approach, both across the industry value chain and outside”
Neal Baumann Deloitte Global insurance industry leader

Priorities for insurers and policymakers

A number of driving forces are shaping the demand and opportunity for product innovation towards net zero across the industry, including customers, policy makers and shareholders. These drivers, alongside the expertise and influencing potential of the insurance sector to shape the agenda and policies, have informed the white paper’s nine key priority areas for insurance product innovation to support climate mitigation:

Enabling and incentivising low carbon choices
Mainstreaming the encouragement of climate mitigation through efficient and resilient reinstatement
Implementing environmentally sustainable claims servicing
Enabling capital flows towards green solutions through risk transfer solutions
Creating removal-based carbon offsets through natural capital protection
Scaling emerging and existing low carbon and net-negative technologies and start-ups
Supporting the sustainable decommissioning of carbon-intensive assets
Developing risk advisory services to support clients’ climate mitigation understanding and approach
Developing solutions for increasing climate legal liability and environmental litigation

Vision to reality

Related to the nine key priority areas for the sector, the paper calls out seven actions to address barriers to innovation and foster greater collaboration across and beyond the insurance value chain.

Actively engage with government on transition protection needs and private-public partnership opportunities to facilitate blended-finance approaches to scaling risk-transfer capital, such as through state-backed reinsurance pools.
Upskill to enhance an ‘engineering’ approach to underwriting, building on close relationships with technology developers of all sizes.
Coordinate across the insurance value-chain across brokers, insurers and others to reduce duplication through a common industry framework that recognises the unique role each player should address to achieve net zero.
Drive ‘long-termism’ through a culture that incentivises innovation and works to reduce barriers that tend to embed static business-models.
Enhance structuring of existing climate data and development of key climate models, bringing together model-vendors, in-house analytics teams, and original equipment manufacturers (OEMs) to access key data sources and advise on best practice.
Innovate product structures and new insurance offerings that are aligned to client needs, ensuring clients and customers are aware of how newer products and structures, such as usage-based products or parametrics, can benefit them.
Align insurance solutions with insurers commercial and climate objectives so growth areas, such as IP insurance or risk consulting, appropriately integrate climate considerations in ways that enable additional innovation.

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Neal Baumann

Global Insurance Sector Leader

David Rush

EMEA Insurance Co-Lead

Andy Masters

UK Insurance Sector Leader

Sustainable Finance

Katherine Lampen

Sustainability Services, Risk Advisory Partner

Tasha Clarbour

Sustainable Finance director

Greg Lowe

Sustainable Finance director


Margaret Doyle

Partner, Head of Clients & Markets, Financial Services and Real Estate

Peter Evans

Insights senior manager