Investing in our world's forests

The international Day of Forests on 21 March and insurance

Forests are a vital resource for life on our planet and yet they remain largely unprotected in case disaster strikes. The international Day of Forests on 21 March offers an excellent opportunity to raise awareness of the importance of all types of forests – and the role the insurance industry can play to protect them.

Forests cover one third of the Earth's land mass. Around 1.6 billion people depend on forests for their livelihood. They are the most biologically-diverse ecosystems on land, and are home to over 80% of our animals, plants and insects. They also provide shelter, jobs and security for forest-dependent communities.

Despite all these undisputed facts, forests are largely uninsured today. We believe the insurance industry can help to change this through viable forest management solutions.

Human activity has reduced forest areas over the last centuries. A total area of 129 million ha has been lost since 1990, according to the UN Food and Agriculture Organisation (FAO). And global deforestation continues - 13 million hectares of forest are destroyed annually. Deforestation accounts for 12 to 20 percent of the global greenhouse gas emissions that contribute to climate change.

While their land area has diminished, natural forests still represent 93% of the total forest area worldwide. From a re/insurance perspective, natural forests are difficult to value for underwriting purposes because they contain so many different tree species and there's very little information about age, yield class and growth rates. This means insurance coverage for these forests is limited to firefighting cost insurance and carbon offset-related products.

Planted forests, on the other hand, have spread rapidly in recent years. Since 1990, the planted forest area has increased by 110 million ha in total. Today, this forest category accounts for 7% of the total forest area and contains plants ranging from eucalyptus to pine.

Peter Welten, author of the Swiss Re publication "Forestry insurance: a largely untapped potential", summarizes the situation as follows: "As planted forests rely on intensive land use and focus on a small number of species, they create a concentration of values and hence a heightened risk exposure. This is where forest insurance can be a valuable tool. Forestry insurance for standing timber offers protection against fire and windstorm – the two predominant forestry risks – and other risks, such as flood or ice and snow."

The insurance industry's contribution to protecting forests may be small currently, but it's one concrete way we can invest in this important resource - on the occasion of the international Day of Forests and beyond.

For more information about the international Day of Forests follow this link:


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