(Bloomberg) -- Swiss Re AG isn’t waiting around to foot the bill from climate change.
The world’s second-largest reinsurer is pushing for the development of technologies to capture and store carbon dioxide, removing it permanently from the atmosphere. While this industry is “still in its infancy,” it could bring a “wealth of opportunities for insurance and investments,” according to the firm’s annual study of emerging risks.
Insurers and reinsurers stand to be among the biggest losers from rising global temperatures that can destroy homes and businesses, uproot populations and make entire regions uninhabitable. The industry has a responsibility to “uphold awareness of climate risks” and be an “effective partner for climate-risk adaptation and the transition to a low-carbon economy,” according to the study.
To limit global warming to less than 2 degrees Celsius above pre-industrial levels -- a goal of the 2015 Paris climate accord -- the carbon-removal business would need to grow to the size of today’s oil and gas industry by 2050, the study states.
Energy companies have been using carbon-capture technology for more than 50 years -- not to reduce emissions, but using the gas to increase oil production from depleted wells. The process of scaling up the technology as part of efforts to control climate change has been slow because there’s currently little money to be made from capturing carbon dioxide and burying it underground. That could change if governments introduced incentives in the form of carbon pricing or mandatory quotas.
As much as 20 billion tons of carbon emissions will need to be removed from the atmosphere each year to achieve net zero emissions by 2050. To reach that goal, carbon-capture must be backed up by broader efforts to reduce emissions, according to the study. The cost of meeting the Paris accord’s target is estimated at as much as 2% of global economic output, but failing to meet it would be far more costly in the long run.
While “innovative insurance” could facilitate the growth of carbon capture, insurers will have to find ways to work with companies that are creating new technologies but have limited track records and loss histories, according to the study. Insurers could initially help these companies with risk assessment, and later, as they mature, sell them policies to help contain their exposure to risk.
