A joint report from Howden and Pollination, a specialist climate change advisory and investment firm, sheds light on the role the insurance industry can play in supporting investment aimed at addressing the global biodiversity and climate crises.
The report highlighted how insurers can mitigate risks throughout the investment process, ultimately driving capital into projects designed to restore ecosystems and combat climate change.
The report outlined four primary ways the insurance sector can contribute to unlocking finance for nature-based solutions:
By expanding and adapting existing insurance products, insurers can help steer investments towards projects that build climate resilience and restore biodiversity.
The study pointed to early progress in sectors such as regenerative agriculture and coastal systems, where insurers have begun offering products that support sustainability efforts. According to the report, these emerging areas provide a significant opportunity for insurers to scale their involvement and influence in nature finance.
Rowan Douglas, CEO of climate risk and resilience at Howden, called for a rethinking of how financial systems incorporate nature.
“We need a Romantic Period of Finance to harmonise progress and our dependencies on nature,” he said, stressing that financial models must evolve to reflect our reliance on natural systems.
He emphasised the crucial role insurance can play in evaluating ecosystem risks and driving capital into projects that protect natural resources.
“Insurance has a significant role in creating value and mobilising finance towards the natural capital we must protect. This report creates a path for insurance to help evaluate ecosystem risks and create the governance systems to reduce, manage, and share risks to both protect natural assets and mobilise public and private capital to align with nature,” Douglas said.
The Insurance Council of Australia (ICA) also released its own report, Advancing Resilient Nature Positive Insurance in Australia, which underscores similar findings.
The report focused on the growing link between environmental challenges and the insurance industry in Australia, highlighting the risks posed by the degradation of natural resources.
It emphasised that industries reliant on natural resources – such as agriculture, manufacturing, and construction – are becoming more vulnerable as climate change and other environmental pressures intensify. This increases risk exposure for insurers, particularly in areas prone to natural disasters.
One of the ICA report’s key findings is the challenge of insurance affordability. With natural disasters becoming more frequent and severe, premiums are rising in high-risk regions, such as South-East Queensland and Northern New South Wales.
The report noted that more than a million households across Australia are struggling with insurance affordability due to increased exposure to environmental risks.
To mitigate these risks, the ICA report suggests that insurers adopt nature-based solutions. For instance, natural barriers like wetlands and mangroves can reduce the impact of floods, while coral reefs can shield coastal areas from storm surges. These nature-based defences can help insurers manage claims costs and keep premiums affordable in high-risk areas.
Both the Howden-Pollination and ICA reports stress the importance of collaboration between the insurance industry, governments, and other stakeholders in addressing nature-related risks.
As nature-related risks continue to grow, the insurance sector has an opportunity to play a leading role in shaping the future of sustainable finance. By investing in nature-positive solutions, insurers can not only manage their own risk exposure but also support broader efforts to protect and restore the natural systems on which the economy relies.
