Matthew McMullin
Global Climate Practice Leader and Energy Industry Practice Leader, North America
Written by
Climate change and the transition toward net zero poses a new suite of challenges and opportunities for companies. In a warmer, wetter world, the day-to-day activities of many businesses face increasing disruptions from the physical impacts of climate change. At the same time, new opportunities to facilitate the transition toward net zero continue to appear. Against this backdrop, the role of insurers in enabling companies to assess, mitigate and transfer risk and focus on their core operations is more important than ever. The insurance industry has an important opportunity to lead this transition by advancing and implementing its expertise to help companies successfully navigate the challenges ahead.
With the launch of Chubb Climate+, Chubb will apply its industry-leading underwriting, risk engineering, and claims services to support companies across a broad spectrum of industries as they respond to climate change. The Chubb Climate+ team combines our extensive climate resources in a new business unit to strengthen our ability to look ahead and create new solutions for clients as we help move forward in the transition toward net zero.
A base of experience
Chubb has been assessing, mitigating, and transferring risk in the renewable and alternative energy arena for more than 20 years. Our risk engineers and underwriters have provided support as wind power technology has advanced, projects and turbines have increased dramatically in scale, and wind has grown to roughly 10% of U.S. electricity generation. We’ve stood by wind and solar clients through extreme weather events such as wildfires and hailstorms, just as we’re helping clients in other industries adapt to these threats and mitigate damage from them.
While these are important first steps, we recognize that achieving a net-zero economy will require the development and deployment of a range of new decarbonization technologies. For example, carbon capture and storage is widely recognized as an essential tool to avoid the worst impacts of climate change, but large-scale application of the technology will require innovative approaches in risk engineering and underwriting. Clean hydrogen has great promise as a fuel for heavy industry, but exactly how it will be deployed to decarbonize energy generation, transportation, and heavy industry remains under development. Activity in these and many other areas is now accelerating with a boost from government incentives, especially in the U.S. and Europe, giving companies and their insurers that much more to stay on top of.
Learning—and looking ahead
For insurers, this fast-moving transition requires us to be adaptable and nimble while staying true to our mission of assessing, mitigating, and transferring risk in a technically rigorous way. It means less emphasis on historical data (to the extent there is limited historical data) and more focus on proactive risk engineering and underwriting to mitigate and prevent loss and make prudent underwriting decisions.
On the technology front, the rapid pace of change means engaging with early-stage climate tech companies to gain a line of sight into emerging technologies and their risk mitigation needs. On the climate-risk front, it means building on our traditional catastrophe expertise with new tools such as our climate-risk scorecard and climate-focused physical risk assessments. Working with leading industry experts and academics is a priority. So is using our Risk Engineering Center to share our climate learnings with employees, clients, agents, brokers, and other stakeholders.
Broad challenges and specific risks
The transition amplifies the importance of bringing deep industry knowledge to every client, agent, and broker conversation. Because while the challenges of climate change and decarbonization are broad, they are also highly industry specific. The agriculture sector faces obvious threats from extreme weather events but also a transition to less emission-intensive fertilizers, with implications for crop choices and yields. Utilities and independent power producers need fire-prevention guidance for large battery energy storage systems. In transportation, the risks of high-speed electric vehicle charging stations differ from those of gas stations. And oil and gas companies, which continue to supply needed energy as the transition proceeds, may need guidance on deploying methane emission reduction plans as they do so.
While the transition toward net zero is a multi-decade marathon, investment and technological innovation over the next 10 years will be critical to achieving the 2050 goals. We are here to facilitate the transition now and for the long haul.