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Policy Forum
Environmental Economics

Insurance-sector tools to combat biodiversity loss

Risk transfer can facilitate nature-positive investments
Science
11 Aug 2022
Vol 377, Issue 6607
pp. 714-716

Abstract

We are in the middle of a global mass extinction event (1). In addition to heightened risks related to food security, disease, natural disasters, air and water quality, and nonmaterial aspects of life (1), loss of biodiversity also threatens the livelihoods of billions of people and creates risks to the economy. The World Economic Forum estimated that over half of global gross domestic product ($44 trillion) is highly or moderately dependent on nature (2). Some of these risks are then transmitted to financial and insurance markets (3). Addressing all these risks has been articulated in the “nature-positive” goal of halting and reversing nature loss globally by 2030. Achieving this goal will require profound changes in the relationship between nature, economies, and social and governing institutions. As leading risk managers, the insurance sector, which is not typically engaged widely on nature issues, has multiple tools to help mainstream the transition.

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References and Notes

1
IPBES, “Summary for policymakers of the global assessment report on biodiversity and ecosystem services of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services” (IPBES secretariat, 2019).
2
World Economic Forum, “Nature risk rising: Why the crisis engulfing nature matters for business and the economy” (2019).
3
U. N. D. P. Sustainable Insurance Forum, “Nature-related risks in the global insurance sector” (Sustainable Insurance Forum, United Nations Development Programme, 2021).
4
J. Chandellier, M. Malacain, Biodiversity and Re/insurance: An Ecosystem at Risk (Muséum National d’Histoire Naturelle, Paris, 2021).
5
C. Kousky, Understanding Disaster Insurance: New Tools for a more Resilient Future (Island Press, 2022).
6
J. Ravenelle, P. J. Nyhus, Conserv. Biol. 31, 1247 (2017).
7
O. Wilson-Holt, P. Steele, “Human–wildlife conflict and insurance: Can insurance reduce the costs of living with wildlife?” in IIED Discussion Paper. IIED, London, 2019.
8
L. Cai, J. Cui, H. Jo, J. Bus. Ethics 139, 563 (2016).
9
Oceana and UNEP PSI, “Risk assessment and control of IUU fishing for the marine insurance industry” (UNEP–Finance Initiative, Principles for Sustainable Insurance, and Oceana, 2018).
10
AXA, “AXA Group Ecosystem conversion & Deforestation policy and Natural World Heritage Sites policy” (2021).
11
N. Martinez et al., “Wildfire resilience insurance: Quantifying the risk reduction of ecological forestry with insurance” (Willis Towers Watson and The Nature Conservancy, 2021).
12
A. Bernhardt et al., “Community-based catastrophe insurance: A model for closing the disaster protection gap” (Marsh McLennan Advantage and the Wharton Risk Center at the University of Pennsylvania, 2021).
13
Munich Re and The Nature Conservancy, “Nature’s remedy: Improving flood resilience through community insurance and nature-based mitigation” (Munich Re and The Nature Conservancy, 2021).
14
UNEP, “State of Finance for Nature: Tripling Investments in Nature-Based Solutions by 2030” (United Nations Environment Programme, The World Economic Forum, and The Economics of Land Degradation, Nairobi, 2021).
15
C. Kousky, S. Light, Duke Law J. 69, 323 (2019).

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Science
Volume 377 | Issue 6607
12 August 2022

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Published in print: 12 August 2022

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Acknowledgments

I thank the National Science Foundation (award 1939913) for support of this work.

Authors

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Carolyn Kousky [email protected]
Environmental Defense Fund, Philadelphia, PA, USA.

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