According to a new report from the World Economic Forum, developed in collaboration with Boston Consulting Group (BCG), without adaptive action, climate-driven health impacts could erode insurer profitability and push coverage costs higher for consumers across markets.
The new report, which assessed climate-driven health impacts across four of the most affected sectors (food and agriculture, the built environment, health and health care, and insurance), found that over the next 25 years, these impacts could result in more than $1.5 trillion in lost output from select climate-related illnesses.
Eric White, Head of Climate Resilience at the World Economic Forum, commented, “We are entering an era in which protecting worker health is proving essential to business continuity and long-term resilience.
“Every year we delay embedding resilience into business decisions, the risks to human health and productivity climb, and the costs of adaptation rise.”
The report noted that the insurance sector, which accounts for over 7% of global GDP, plays a vital role in protecting people from the economic impact of ill health and subsequent financial hardship through health, life, and casualty coverage.
“Yet climate change threatens to erode profitability, with forecasts indicating it could cause 0.75% excess mortality annually by 2050 under a moderate warming scenario,” the report added.
Notably, the World Economic Forum and BCG suggested that as climate-health risks escalate, insurers face rising medical, life, and casualty claims, straining capital and pushing premiums higher.
However, the joint report stated that insurers also have a unique opportunity and responsibility to build resilience.
“By developing innovative products, building climate expertise, and helping prevent climate-related illness, they can protect both communities and the bottom line,” the report said.
It continued, “As enablers of resilience, insurers also play an important role in incentivising other sectors to reduce their own risks.”
Elia Tziambazis, managing director and partner at BCG, added, “Momentum on health adaptation is building, but financing and implementation are still far below what’s needed.
“The challenge now is to scale proven solutions fast enough to keep pace with climate change, mitigate its impact on workforces, and invest in the innovation that will define the next generation of resilience services and products.”
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