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We insure all that we love – why don't we protect mother nature?

Climate change remains the greatest global challenge we will face in the coming decades. While nations struggle with the immense human tragedy of the COVID-19 crisis, and the associated economic fallout and societal disruption, we must strive to ensure that climate action does not become a second-tier priority.

From wildfires and extreme weather events to deforestation and reef destruction, we are surrounded by totems of our damaged natural world. At Swiss Re, we believe investing in our natural capital is key to mitigating the impact of climate change, population growth and urbanisation.

Nature has proven its ability to self-heal, capture carbon and reduce the impact of weather-related disasters. But its capacity to continue do so is waning - we need to support it, protecting natural capital and anchoring our infrastructure in nature-based solutions.

The enabling role of insurance

Insurance has an important role in protecting natural assets. We would baulk at the thought of not offsetting risks against bricks and mortar, or our shiny new cars, for example. We also insure our health and take out policies to protect our quality of life. Natural assets have huge environmental, economic, health and societal benefits and can be covered in the same way.

Some of the most effective prevention, damage mitigation and recovery strategies for the natural world take their inspiration from nature itself. Copying nature or designing solutions that lean on its support increases resilience against challenges such as climate change and natural disasters. And insurance can protect and enhance the feasibility of many of these 'nature-based solutions' (NBS).

Insurance is also key to enabling investment in and scaling of green projects and infrastructure. These are key to helping us tackle environmental, economic and social challenges in a sustainable way.

At Swiss Re, we use data to better understand nature and build advanced risk tools that help us and our clients plan better and make more informed decisions. Using this information, we also work with governments to support their planning and, ultimately, strengthen their resilience strategies.

Nature’s close ties with the economy

The interdependency between nature and the economy is often under-appreciated. Natural capital and ecosystem services contribute significantly towards the national wealth of many countries. Our recent Biodiversity end Ecosystems Services Index shows that 55% of global GDP is dependent on intact ecosystems.

In 2017, Swiss Re launched a new insurance solution to protect the Mesoamerican reef, and the associated tourism revenue, from storm damage. The product ensures that after a storm, funds are quickly disbursed, enabling community members to rapidly start restoration actions and minimise coral damage. This is a model that can be scaled up and replicated elsewhere, with fast pay-outs and underpinning rapid action that prevents further damage. This was recently proven during Hurricane Delta, when it hit Quintana Roo in October and triggered a payout that enabled the stabilisation of uprooted coral colonies, and the collection and replanting of broken coral fragments, many of which will now grow as new coral colonies.

Sustainable by design

Considering the ecological impact of projects as part of the design is another key component to sustainability and building in resilience. Insurance products can be used to encourage more sustainable building, using natural materials. A unique project in the Netherlands last year is a good example of this. Swiss Re provided construction risk cover to move 5 million cubic metres of sand around the island of Texel to create a new coastline and mitigate erosion risk. The project not only protected the tourism revenue of this World Heritage Site, but also delivered financial benefits, with enhanced fish production, climate regulation, water quality regulation.

Canada, too, is showing great leadership in addressing climate risks and protecting its natural capital. Each year, $5.3 billion is needed to help adapt infrastructure (including buildings, dikes and roads) to physical climate risks, according to an estimate from the Federation of Canadian Municipalities and the Insurance Bureau of Canada. The country is home to approximately one-quarter of the world’s remaining wetlands – often described as one of the Earth’s most productive ecosystems. Wetlands, coastal marshes, dune systems and riparian forests all help protect Canadian communities from flooding. Insurance is playing a vital role, helping municipalities and facilitating investment in these natural assets, including protection and sustainable construction. In turn, this is creating jobs, economic stability and more resilient communities.

COVID-19 has taught us about the importance of having a comprehensive view on risks, being prepared for extreme events and investing in the right prevention system. As we look towards recovering from this crisis, we need to ensure we bring these lessons to bear in our climate adaptation strategies.

Our ability to shape a low-carbon future and build more sustainable economies depends on our ability to scale and accelerate nature-based solutions. We can only achieve this with significant and sustained investment in nature and ecosystem services, which insurance helps to protect and enable.

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