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SUSTAINABLE DEVELOPMENT

Good insurance practices could stem global warming

Climate change is of great interest to those of us in the insurance industry.

In Summary
  • Over 100 Insurance Companies worldwide have signed up to the United Nations Environmental Programme Finance Initiative Principles of Sustainable Insurance.
  • Our inter-related roles as risk managers, insurers and investors contribute to promoting economic, social and environmental sustainability, commonly referred to as sustainable development.

Water everywhere but not a drop to drink! This is has become the unfortunate reality we find ourselves in whenever the rainy season sets upon us. This is indeed an even deeper absurdity at a time when adequately treated clean water is a strategic weapon in the fight against the Covid-19 pandemic.

Globally, there is a bleak outlook for billions of people in relation to sufficient access to clean water. According to the United Nation’s Water Development Report 2019, more than two billion people suffer “high water stress” while about four billion experience severe water scarcity during at least one month of the year.” The report further predicts that the situation could get worse as climate change will negatively affect the availability, quality and quantity of water.

The Horizon East Africa (2019) research report authored by Msingi, Kenya Markets Trust and Gatsby Africa focused closer home and painted a bleak picture for East Africa. The report categorically states, “Climate change poses a major threat to East Africa” as temperatures continue to increase, water becomes more scarce and sea levels rise to the point of flooding coastal settlements.

The report predicts that the unfolding situation will put rural livelihoods at risk and compromise food security, as temperatures continue to rise. The research further predicts that the number of climate refugees in East Africa will rise from about 1.8 million in 2020 to between 6.9 million and 10 million by 2050.

Sadly, the predictions of this research report are with us. Recent media reports have been highlighting the devastation of climate change; thousands of people have been forced to flee their homes across East Africa; critical infrastructure has been rendered unusable, with roads, bridges and even hospitals being washed away.

Lake Victoria has risen to its highest levels in 50 years submerging long-established island and lakeside settlements; rivers in the region such as Nzoia, Mara, Lusumu, Yala and Malakisi in Kenya have experienced overflows flooding settlements and; rendering thousands homeless. Ironically, floods have killed more people in the region than the Covid-19 pandemic.

It is my view that the critical role that effective risk management can play to mitigate the calamities we are experiencing has not fully been exploited. Climate change is of great interest to those of us in the insurance industry, where our inter-related roles as risk managers, insurers and investors contribute to promoting economic, social and environmental sustainability, commonly referred to as sustainable development.

With the adoption of the UN Sustainable Development Goals and  Paris Agreement on Climate Change (2015), there is an urgent need for all sectors of society to respond and find solutions to sustainability challenges the world is facing and especially to the climate change risk. Sustainability issues  also captured in the  Environmental, Social and Governance (ESG) framework will pose a shared risk to insurers, communities, businesses, cities, governments and society at large if neglected.

Beyond the doom and gloom, the good news is that the launch of “Principles of Sustainable Insurance” (PSI) in 2012 ignited  the call to innovate and collaborate for a sustainable world. The four Principles for Sustainable Insurance, including a list of possible actions, provide a common aspiration and global framework for the insurance industry to manage ESG issues, and to strengthen its contribution to building resilient, inclusive and sustainable communities and economies.

To date, more than 100 insurance Companies worldwide have signed up to the United Nations Environmental Programme Finance Initiative Principles of Sustainable Insurance.

This is also an open challenge to the sector to  commit to develop and expand innovative risk management and insurance solutions that promote social and environmental protection, inclusive insurance, renewable energy, food security, clean water, sustainable cities and disaster-resilient communities in pursuit of a more forward-looking and sustainable world. It is an idea whose time has come.

Chief Executive Officer, ICEA Lion Insurance Holdings Ltd. [email protected]