Ping An highlights parametric and index insurance for combatting climate change

Richard Sheng, Secretary of the Board of Directors for Chinese insurer Ping An, has highlighted the role of parametric and index insurance in combatting the challenges of climate change.

Speaking via videoconference on green and sustainable finance during the recent COP27 event, Sheng noted how his company has been exploring coverages that combine parametric and index insurance to confront climate risks.

This coverage makes use of heavy rainfall and typhoon data as parameters for insurance payouts, and aims to act as an economic ‘shock absorber’ and social ‘stabiliser,’ Sheng explained.

Once the compensation conditions are met, the compensation amount can be determined without on-site inspection, which helps accelerate post-disaster reconstruction and resumption of business operations.

In 2022, Ping An also piloted forest carbon sinks remote sensing index insurance in six provinces, and provided carbon sink risks protection with RMB34.28 million for 340,000 mu (22,667 hectares) of forest land, Sheng added.

“Climate is a common challenge faced by all mankind,” he said during the video conference. “As estimated, in order to achieve carbon neutrality, China needs direct investment amounting to more than RMB100 trillion, presenting financial institutions with opportunities to undertake the mission of creating social value while improving revenues.”

Managing the risks related to climate change forms part of Ping An’s long-term development strategy, and it has also moved to invest in green and low carbon assets and reduce the proportion of high-carbon emitting assets to mitigate the financial risks related to climate change.

This includes supporting China’s goals of peaking carbon emissions by 2030 and achieving carbon neutrality by 2060.

“A secure transition of energy is a trend with rather high certainty,” said Sheng. “Ping An is fully harnessing its advantage in long-term capital from insurance. In coherence with the long cycle of green projects, it gives fresh impetus to low-carbon development while obtaining steady income.”

Also speaking alongside the COP27 conference, Poing An’s Chief Innovation Officer, Jonathan Larsen, said that he sees significant opportunities for the insurance and reinsurance industries to finance the transition to a low carbon economy.

Source: Reinsurance News,

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