IVE SURVEY

Overview

The insurance value of ecosystems is only realisable if the insurance industry is willing and able to recognise it. The IVE survey set out to establish where the industry actually stands: how it understands the relationship between ecosystem condition and the losses it pays, what instruments it has that could reward risk reduction, and what prevents it from doing so today.

The study is based on a literature review and on interviews with insurers and reinsurers, and it presents what the industry said rather than what the project expected it to say. That includes the positions that are inconvenient for the case for Nature Based Solutions: where the actuarial basis for a risk reduction claim is not yet sufficient, where the timescale of an intervention does not match the timescale of a contract, and where the incentives of the parties involved point away from the outcome everyone says they want.

What the survey covers

The survey examines the role the insurance industry plays in disaster risk reduction and climate change adaptation, and the conditions under which that role could be expanded. It covers the products through which risk is transferred — indemnity cover, parametric cover, reinsurance, and the catastrophe bonds and similar instruments that sit alongside them — and the extent to which each can reflect a reduction in risk produced by a change in the landscape.

It covers the barriers identified by the interviewees, grouped into those that are technical, those that arise from the regulatory and supervisory framework, and those that arise from the structure of the market itself. Among the technical barriers, the availability of evidence at the resolution an underwriter needs is the most frequently cited, which is precisely the gap that the modelling and valuation work in the rest of the guide is intended to close.

It also records the opportunities the industry identified, which are frequently not the ones a project would propose. Several relate to the public sector's role as the ultimate bearer of risk, and to the possibility of using insurance arrangements to make the case for investment in risk reduction visible in public budgets.

How the results are used

The survey results inform the natural assurance scheme concept directly: a natural assurance scheme is an arrangement in which the risk reduction delivered by an ecosystem is recognised and paid for, and the design of such an arrangement depends on what an insurer or a public authority is actually able to commit to. The findings are also the evidence base for the policy recommendations on engaging the insurance sector.