Virgina Sentance, Partner – Climate and Sustainability and Rebecca Tremain, Associate Director, will be attending New York Climate Week. Please get in touch to discuss the strategic challenges and opportunities facing insurers on the climate and sustainability agenda.
The insurance industry has long been more than a carrier of risk. Through its client relationships and investment decisions, it has shaped behaviour – first around risk management, and more recently around decarbonisation, including underwriting clean technology projects. Through this, it continues to be an important catalyst for climate action.
Insurers arrive at this year's Climate Week NYC in a different position to previous years. Political backlash against net zero is hardening across major markets, the industry's own flagship climate coalition has been dismantled and rebuilt on weaker footing, and disclosure regimes that were meant to converge are instead fragmenting. Set against a physical risk landscape that is deteriorating faster than most models anticipated, insurers face a more challenging strategic environment than they did twelve months ago.
Five questions should be front of mind.
How can insurers respond to the physical risk protection gap and prepare for the prospect of increasingly uninsurable risks?
This summer, we saw another spate of devastating wildfires across France, Spain and Portugal, forcing more than 300,000 evacuations. France recorded its worst wildfire season in over a decade, and Spain's Ávila fire became the largest in the country's recorded history. This follows a European-wide pattern: 2.2 million hectares of land were destroyed across Europe in 2025 alone, up sharply from 1.4 million hectares in 2022. Europe accounted for 5% of the EUR 173 billion of global wildfire losses in the nine years between 2016 and 2025.
The proliferation of extreme climate events – wildfires, flash flooding, and other natural catastrophes – is not a market-share problem for insurers to manage at the margins. It is increasingly a systemic financial stability issue, with knock-on effects for capital markets and public finances as protection gaps widen and governments absorb costs that private markets will not underwrite. Insurers will also be placed under increasing pressure to adopt a wider suite of tools to keep coverage affordable and accessible.
What product innovations, public-private models and other supporting infrastructure are needed to respond to the changing risk landscape?
Parametric insurance, resilience bonds, and public-private risk pools are moving from pilot to mainstream as standard products become unworkable in the highest-risk geographies. But private-market innovation alone won't close the gap in the highest-risk geographies – the design of public backstops, and the transition away from them, matters just as much.
The UK’s private-public flood reinsurance program, FloodRe, is due to be wound down in 2039, but there are real questions about viability once that backstop is removed. Has enough been done to change building practices, strengthen flood resilience, and shift the underlying market so private insurers can price flood risk without a public guarantee behind them?
Other governments are taking different approaches. The US’ National Flood Insurance Programme (NFIP) has the federal government acting as a direct public insurer rather than backstopping private cover. Alongside various national risk pooling initiatives, the European Insurance and Occupational Pensions Authority (EIOPA) had previously considered a European natural catastrophe insurance pool.
On 16 September, European Commission President Ursula von der Leyen announced, in her State of the Union speech, a European Climate Insurance Alliance. She noted that only 25% of catastrophe losses are currently covered by private insurance.
The direction these public models take will shape the operating environment for insurers' own product innovation.
New products will also only be as good as the capability behind them – actuarial and underwriting talent that can model compounding, non-stationary risk (where the past is no longer a reliable guide to the future) is now a bottleneck as much as capital is. Insurers who invest in this modelling capacity now will be the ones setting the terms of the products that follow.
How should insurers navigate regulatory divergence across sustainability disclosure regimes while keeping credible and consistent climate commitments?
Regulatory authorities across the world are firming up their disclosure regimes and are diverging in their approaches. Insurers and other corporates will need to contend with this fracturing of regulatory standards beyond the global baseline set by the International Sustainability Standards Board (ISSB) and the two volumes of its International Financial Reporting Standards (IFRS).
While the UK’s Sustainability Reporting Standards (SRS) broadly adopts the IFRS S1 and S2 approaches, it’s flanked on either side by the EU and US approaches. The EU’s regime includes ten additional standards over and above the ISSB standards and captures both listed and large private firms within scope. The US Securities and Exchange Commission (SEC) has scaled back its disclosure rules in response to political pressure. There are also state-level nuances in scope, with California being the common outlier.
This divergence is not simply a compliance-cost problem. It is a question of strategic asymmetry. Firms that are required to publish transition plans in one jurisdiction, for instance large unlisted European corporates, will be exposed to greater scrutiny and liability risk than their non-European counterparts. Organisations operating across these jurisdictions will need to consider how they mitigate these risks and at what level they’ll pitch their reporting to ensure consistency.
That, in turn, raises a comparability problem – and a capital allocation one. Firms and investors will need a view on which jurisdiction's baseline to design to, and what that decision costs them competitively.
How will insurers’ role in transition finance evolve? How can insurers support the net zero transition while managing policy and market uncertainty?
The UK’s 2024 Transition Finance Market Review set out a clear vision for insurance’s role in the transition, including: a product suite to de-risk transition activities at every stage, long-term underwriting to help emerging climate technologies reach maturity, and closer collaboration with real economy partners on tailored solutions for high-emitting sectors and nascent technologies.
Delivering on this would move insurers from finance partner to strategic partner and guarantor of the transition. The mechanics are still being worked out, but the sector will need to take the driving seat, building on its previous efforts for collective action.
Insurers’ efforts to pull together on their commitments around transition finance, under the auspices of the Net Zero Insurance Alliance (NZIA), fell apart in 2024. Several of the global insurers signed up were forced to pull out in the face of legal opposition – ostensibly in the name of antitrust – from several US state attorneys general.
Its successor, the Forum for Insurance Transition (FIT), represents much of what has shifted. The new Forum places its emphasis on firm-level voluntary transition plans. In lieu of prescriptive mandates, it serves as a consultative forum to share best practice and provide guidance. The work continues, but without a binding framework holding firms to common standards, ambition is harder to enforce and easier to quietly scale back.
How can insurers engage constructively in the political debate on net zero while navigating cultural backlash and maintaining climate leadership?
An important question follows for insurers: how do they continue to play an instrumental role in the face of a prevailing wind against net zero and wider ESG initiatives?
In the UK, Reform UK has committed to ‘Scrap Net Zero’ by abandoning the UK’s 2050 Net Zero target and related mandates; Germany’s AfD blames Energiewende for high household energy costs; France’s National Rally has set out plans to unwind EU and national climate targets; and the US federal government has stepped back from long-term net zero commitments altogether.
Insurers will need to consider how they tell a more nuanced story to policymakers around their net zero and transition finance initiatives. These should focus on helping businesses and individuals to mitigate the very real risks that are already playing out today, but that can also be expected in the future. There is an opportunity to emphasise how risk-based discussions help businesses remain resilient and competitive, underpinning wider economic growth.
Climate impacts pose an existential risk to the insurance sector. These questions frame the specific discrete challenges facing insurers and reinsurers. The extent to which firms can embrace these challenges and engage with innovative public policy arguments will dictate whether they lead or lag the climate and associated market transitions.
How can Flint help?
- Our team combines regulatory, political and commercial expertise supported by our climate and sustainability specialists. We can help you anticipate how governments and regulators will approach disclosure and climate risk oversight. We help our clients engage and land key messages as these regimes evolve.
- We also help our clients develop compelling narratives, policy positions and robust evidence to strengthen advocacy, influence policy debates and reinforce credibility with priority audiences.
- We understand how both regulatory and political decision makers think and how these two worlds come together. We can help you think strategically about your regulatory and political engagement to support your commercial objectives
