Skip to content

The force of nature

Why nature-positive insurance policies make good business sense  

Did you know that $44 trillion of annual economic value generation – that’s half of the global GDP – is directly dependent on nature?

But nature loss caused by climate change, land development, pollution, over exploitation of natural resources and declining biodiversity are already exposing businesses to many unprecedented risks.

That’s why the ABI is committed to raising awareness of nature related risks and opportunities for the insurance sector.

The facts make depressing reading. There has been a 70% drop in global wildlife populations since 1970 and 85% of global wetlands have disappeared.  Here in the UK, a quarter of mammals are at risk of extinction and 84% of our rivers are in poor ecological health. The UK ranks in the bottom 10% of countries for biodiversity which is a shameful reflection of our environmental neglect.

This spiralling trajectory cannot continue. Nature provides food, water, essential raw materials and a natural ‘office’ environment in which businesses can thrive.

Mother nature means business

It’s not just the obvious travel and tourism industry that relies on mother nature to provide a monetisable landscape. From private landlords to manufacturing, food production, retail and leisure, nature helps protect all business sectors from extreme weather conditions. Flooding, freezing and heatwaves can all present risks to business operations, employees or members of the public. Not to mention the associated costs of insuring, protecting and repairing the fallout of natural weather extremes.

We are all well versed on the positive impact of nature on physical and mental wellbeing. But it’s invaluable, and often invisible contribution to business should never be underestimated. Nature is responsible for providing the raw materials required to keep the construction industry building, car manufacturers creating, restaurants reinventing recipes and hairdressers highlighting.

Natural liability insurance

The UK’s ambitious net-zero targets cannot be achieved with man-made innovation, legislation and new technologies alone. We also need nature to provide natural resilience by absorbing carbon from the atmosphere which will help reduce the number of nature-related risks.

Aligning nature protection and business strategy is not simple – it involves a range of sometimes complex and competing interests.

That’s why many businesses have not found it easy to understand and embrace their reliance on nature when it comes to developing their business risks assessments.

As nature-related claims frequency and costs are rising, how can business reduce their exposure to these risks?

The ABI has produced a Guide to Action on Nature. Here is a summary of 10 recommendations for conducting good, green business.

1. Learn best practice from early adopters within your sector

2. Identify which external organisations can give you relevant support

3. Incentivise nature positive behaviours with employees, suppliers, clients and customers

4. Finance through carbon credits and offsetting

5. Extend existing net zero strategies into nature positive strategies

6. Scale up investment in nature-positive businesses or projects

7. Identify short- and long-term priorities and set targets to reduce nature-damaging activities

8. Set up internal groups who will champion the guiding principles and accountability of nature initiatives

9. Sustainable investments in green bonds, high integrity nature-positive credits and voluntary carbon offsetting markets

10. Revisit plans and ambition levels based on changing landscapes – natural and governmental

How can insurers promote nature-positive policies?

Nature loss is one of the most critical issues facing our planet. It’s shocking decline not only threatens our entire eco-system, but it will also harm business and economic growth. No sector is immune from the impact. But every sector can help in reversing nature loss.

The insurance sector can also do its bit to support nature-positive initiatives. Here are just some considerations that could make a world of difference – to profits and the planet.

1. Incentivise insurance customers to take actions that reduce nature risk

2. Share advice on nature adaptation resilience such as how to protect buildings from flooding

3. Green business insurance innovation – from ecosystem insurance, specialised cover for environmentally significant sites and eco-businesses to insurance for providers and users of nature-positive credits and governmental grants

4. Champion underwriting specialists in sustainable projects and nature-nurturing businesses

5. Incorporate nature and environmental factors into business risk assessments

6. Join membership groups such as the ABI who will provide practical guidance on implementing ‘nature positive’ behaviours and business strategies. Their environmental fraud tackling expertise also helps address rural risks and crime such as illegal deforestation.

Nature-nurturing businesses and nature-positive policies make good business sense – morally, socially and financially. That’s why environmental risk mitigation and planet saving policies will undoubtedly be a priority on many boardroom agendas.
April 2024