Insurance companies should reward sustainability

In a recent conference of the German Council for a Sustainable Development, there were concerns raised that the insurance companies should be more involved. This makes sense in two ways: the local and the global. If buildings and processes are made more energy efficient, it seems likely that losses will be reduced and could even have such direct effects as preventing, for example, fire hazards. It would also be likely that someone who has a better control of energy efficiency and makes use of renewable, locally available fuels will have hedged himself better against price risks. Such risk reductions should naturally be rewarded with risk premiums. Globally, such actions reduce the risks of climate change and the associated hazards, which should also be rewarded, though it may be harder to calculate the premium.

There is, however, a recent study, "From Risk to Opportunity", that gives concrete examples of how insurance companies could act. This reports that insurer-initiated hurricane-loss prevention methods saved 500 MUSD in Hurricane Katrina and cost 2.5 MUSD to install. The following figure shows that risks from winter storms in Europe are not negliable, though these may not be of hurricane-strength.