The United Nations, the World Wide Fund For Nature (WWF) and leading global insurance and reinsurance firms are calling for the use of innovative risk transfer solutions, including parametric protection and catastrophe bonds, to protect World Heritage Sites.
The UN Environment’s Principles for Sustainable Insurance Initiative (PSI), a collaboration between the UN and insurance or reinsurance companies, worked with its members, as well as the WWF, the UN Educational, Scientific and Cultural Organization (UNESCO) World Heritage Centre, with support from sustainability service provider ECOFACT, to produce a guide on insuring the future of the world’s most important heritage sites.
One element of the work is to provide guidance for the insurance and reinsurance sector to prevent or reduce the risk of insuring and investing in companies and projects that could pose a threat of damage to World Heritage Sites.
This part of the work has a particularly focus on sectors such as oil and gas, mining, and large-scale hydropower, as well as logging, fishing, agriculture, plantations, and large-scale infrastructure such as pipelines, roads and mega-ports.
“Protecting World Heritage Sites for present and future generations is not an option, but an obligation for all. Losing these treasures means losing sources of life, inspiration and human well-being, and losing the war against unsustainable development,” explained Butch Bacani, PSI leader at UN Environment. “This guide will help insurers protect our world’s most prized assets in their risk management, insurance and investment activities, while curbing carbon emissions, building disaster resilience, and ensuring healthy ecosystems. We call on insurers around the world to unite behind the science, show decisive leadership, and take ambitious action in insuring a sustainable future.”
“Natural World Heritage Sites include some of the world’s most amazing landscapes. A source of wonder and inspiration, they also provide critical habitats and vital services such as freshwater,” added Margaret Kuhlow, WWF Finance Practice Leader. “This practical guide will enable the insurance sector to make long-term investment decisions that reflect the value of natural World Heritage Sites and support the 11 million people who depend on them for their well-being. We look forward to continuing our work with UNESCO and PSI to support the industry in implementing this guidance.”
Ernesto Ottone R., UNESCO Assistant Director-General for Culture also said, “By proposing sites as World Heritage sites, countries recognise their importance for humankind and commit to protect them. But conserving World Heritage sites is the duty of every one of us. Too many World Heritage sites are threatened by unsustainable development or large-scale infrastructure. We believe the banking and insurance sectors can significantly contribute to protecting these outstanding places by ensuring that their portfolios avoid projects which could impact them.”
Broad support has been seen in the insurance and reinsurance sector, with signatories to an insurance industry statement of commitment to protect World Heritage Sites including: AGROASEMEX (Mexico), Allianz (Germany), Caixa Seguradora (Brazil), Interamerican (Greece), La Banque Postale (France), Liberty Seguros (Brazil), Mongeral Aegon (Brazil), Nat Re (Philippines), Peak Re (Hong Kong SAR, China), Porto Seguro (Brazil), RepRisk (Switzerland), Risk Management Solutions (USA), SCOR (France), Seguradora Líder DPVAT (Brazil), Sompo Japan Nipponkoa (Japan), Swiss Re (Switzerland), Tokio Marine Seguradora (Brazil), the Brazilian Insurance Confederation (CNseg), Certified Sustainable Insurance Partners (USA), Earth Security Group (UK), ICLEI – Local Governments for Sustainability, the Insurance Council of New Zealand, the Microinsurance Network, and the Philippines Insurers & Reinsurers Association.
The work also provides some recommendations on how to better insurer World Heritage Sites, as a way to proactively protect them especially from climate related damages.
The collaboration urges the insurance sector to put its risk management expertise to work in protecting World Heritage Sites, leverage risk models and scenario analytical tools to assess the potential for damage and communicate the economic value of these sites, particularly those which are natural assets.
In addition, quantifying how World Heritage Sites contribute to reducing economic and insured losses is also key, again especially for natural assets such as coral reefs.
The work urges the exploration of the use of innovative risk transfer structures to protect World Heritage Sites, including the use of insurance and reinsurance for natural ecosystems, specifically mentioning parametric insurance and catastrophe bonds, alongside other financial structures such as green and blue bonds.
Increasingly, insurance, reinsurance and insurance-linked securities (ILS) are being positioned alongside risk management, resilience and other financing as a key tool in “insuring a sustainable future” as Bacani says.
Hybrid risk financing structures are likely to emerge, that bring together risk transfer and resilience building, such as the much-discussed resilience bond, providing new investment opportunities for the capital markets and some of the ILS investor base.
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