The insurance industry is at the forefront of financial impacts from natural capital, through factors such as extreme weather events, increased flooding due to erosion of natural capital, increased business disruption, assets threatened by rising sea levels and increasing legal liability. 

Risks & Threats

The Intergovernmental Panel on Climate Change has stated that most aspects of climate change will “persist for many centuries even if emissions of CO2 are stopped.”[1] These aspects include the increasing severity and frequency of extreme weather events such as heat waves and heavy-precipitation storms which in turn lead to wildfires, catastrophic mudslides and increased flooding. According to a study by Munich Re, insured losses due to natural disasters in the United States in 2016 totalled $23.8 billion, an increase of 47% compared to the previous year.[2] These losses are very likely to continue to increase as climate change affects the world’s weather systems. A recent survey of insurance CEOs by PwC revealed that 61% are ‘somewhat concerned’ or ‘extremely concerned’ about how climate change and environmental change may become threats to their organisation’s growth.[3] 

Aside from climate change, which the insurance industry has already begun to recognise as a concern, the stewardship of natural capital can have other effects for the insurance industry. For example, an area affected by groundwater contamination could lead to an increase in claims for an insurer. Similarly, a decrease in plant cover caused by deforestation or desertification can make local areas more flood-prone regardless of extreme weather events associated with climate change. Even without deforestation, changes to the makeup of a natural capital ecosystem can lead to changes in the likelihood of disasters and insured losses. A report from South Africa found that the “occurrence of invasive alien trees increased the number of high fire risk areas by between 31% and 37%.”[4]

The proper stewardship of natural capital should therefore be of concern for those in the insurance industry, and accounting for natural capital risks should enable better risk management and more accurate pricing.


  1. ^ Summary for policymakers of the IPCC Working Group I assessment report Climate Change 2013: the Physical Science, IPCC, 2013
  2. ^ Insurance Information Institute, Facts & Statistics, 2016
  3. ^ PWC, 20th CEO Survey: Key findings in the Insurance industry, February 2017
  4. ^ United Nations Environment Programme Finance Initiative, Insurance in a Changing Risk Landscape, Local lessons from the Southern Cape of South Africa, 2011


There are a number of emerging opportunities from natural capital for the insurance industry. For example, a novel insurance policy has recently been issued for the protection of a coral reef off the coast of Mexico.[1] The local government and companies that depend on tourism driven by the reef will pay the premiums while any payouts resulting from damage to the reef will go towards rebuilding and strengthening the resilience of this important natural capital asset.

Aside from new types of insurance, insurers are also able, through premiums and the conditions of policies, to reward behaviours that ensure natural capital is used sustainably. The UNEP FI suggests that insurers interested in preserving natural capital make “the issuance or renewal of insurance cover dependent on risk prevention and reduction measures,”[2] such as activities that mitigate greenhouse gas emissions or improve disaster resilience.

Whether it is the need to understand climate-change related risks, or the opportunity to create new insurance products to protect and repair natural capital assets, or the ability to reduce premiums and payouts by incentivising the proper stewardship of natural capital, the insurance industry is uniquely positioned to help promote the understanding and analysis of natural capital in our economies.


  1. ^ The Guardian, “Mexico launches pioneering scheme to insure its coral reef,” 2017
  2. ^ United Nations Environment Programme Finance Initiative, Global insurance industry statement, 2013