Climate change - wildfire-prone California collaborates with UN on sustainable insurance solution

The California Department of Insurance and the United Nations are working to develop a sustainable insurance roadmap to address climate risks in the state in the wake of the last two years of wildfires resulting in more than $12 billion in insured losses.

Ricardo Lara Commissioner at the California Department of insurance and Butch Bacani, who leads the U.N. Environment Program Principles for Sustainable Insurance (PSI), announced the Sustainable Insurance Roadmap with the United Nations Environment (UNEP) at a roundtable co-hosted with the UCLA School of Law and UC Berkeley School of Law.

Established in 1868, the California Department of Insurance is the largest consumer protection agency in California, with insurers collecting $310 billion in premiums annually.

The organisations have launched the yearlong effort to develop a Sustainable Insurance Roadmap to confront California’s climate risks.

This is the first time the United Nations has partnered with an American state to create a sustainable insurance strategy and action plan that would tackle the growing risks of climate change. Last year, California experienced the deadliest and most destructive wildfires in the state’s history, resulting in more than $12 billion in insured losses, making it the world’s costliest disaster.

“We have a historic opportunity to utilize insurance markets to protect Californians from the threat of climate change, including rising sea levels, extreme heat and wildfires,” said Insurance Commissioner Ricardo Lara. “Working with the United Nations, we can keep California at the forefront of reducing risks while promoting sustainable investments.”

“A sustainable insurance roadmap will enable California to harness risk reduction measures, insurance solutions, and investments by the insurance industry in order to build safer, disaster-resilient communities, and accelerate the transition to a low-carbon, sustainable economy,” said U.N. PSI leader Butch Bacani. “With Commissioner Lara’s vision and leadership, we look forward to working together with insurers and key stakeholders to drive ambitious climate action now, in line with the aims of the Paris Agreement on Climate Change.”

California is largest insurance market in USA and one of largest in the world

California is the largest insurance market in the U.S., and one of the largest in the world. The California Department of Insurance was one of the first insurance regulatory and supervisory authorities in the world to sign U.N. Environment’s Principles for Sustainable Insurance and commit to tackling global sustainability challenges such as climate change, biodiversity loss and ecosystem degradation, pollution, and social and financial exclusion.

The California Sustainable Insurance Roadmap is envisioned to pave the way for innovative risk management, insurance and investment solutions that reduce climate risks and protect natural ecosystems.

For example, new insurance products could be developed to promote cooler streets and renewable energy. In other countries, insurance solutions for coral reefs and mangroves are emerging as these natural ecosystems have been proven to significantly reduce wave energy and buffer storm surge, reducing flood risk and protecting communities.

Insurance solutions for California’s protective, life-supporting natural infrastructure—such as wetlands and forests—could reduce climate and disaster risk and present new opportunities.

The California Department of Insurance and U.N. Environment’s PSI Initiative will engage insurers and reinsurers, public policy leaders, environmental NGOs, researchers, and risk management experts on the major collaborative effort to make California’s communities and economies resilient, inclusive and sustainable.