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When we need biodiversity insurance it's time to start worrying

Updated: Jan 4, 2021

Until recently I knew very little about the company Swiss Re, aside from the fact they were the original owners of the Gherkin. And less still about what they did. Which, as I now know, is something called reinsurance. This is a key sector in the broader insurance market, and the way insurance companies protect themselves from the risk of a major claim.

It turns out Swiss Re are the global leaders in reinsurance, and as the people who insure the insurers you would expect them to be on top of the major risk factors we face today. So when they start worrying about biodiversity loss and ecosystem collapse, and develop a new tool to measure the associated risk, you know it is time to sit up and take notice.

Why? Because Swiss Re's concern isn't rooted in new found altruism or an eco-warrior purpose. Their motivations are more pragmatic and business-centric. Ultimately, they are looking to protect their own interests and those of their clients. Which is why their focus on ecosystem resilience should concern all of us too. They are the experts in risk after all.

Central to Swiss Re's thinking is the idea of biodiversity and ecosystem services (BES). These are the benefits we all obtain from the world we live in; natural assets that include both the obvious (food, building materials) and the less immediately visible (new medicines, clean air, pollinators).

"Biodiversity and ecosystem services underpin our daily lives and many of our products and services. From the water we drink to the food we grow and the resources we use in manufacturing, we would be at a loss without Mother Nature"
Biodiversity and ecosystem services as defined by Swiss Re
Biodiversity and ecosystem services as defined by Swiss Re

The problem is that, unlike most 'goods' today, these living building blocks of effective ecosystems are not valued or traded at readily observable (or indeed accurate) prices. In a potentially catastrophic failure of market forces, the natural world is often treated as both free and limitless, making it ripe for unsustainable exploitation. With the slow but steady degradation this produces leading, imperceptibly, to the tipping points of abrupt ecosystem collapse and the significant negative implications that follow from this for society (both locally and globally).

Which is why Swiss Re are so concerned from an insurance perspective, and believe these considerations should be a foundational part of strategic decisions for all businesses. Particularly as they calculate that 55% of global GDP is already moderately or highly dependent on BES.

To help businesses assess these environmental risks, Swiss Re have developed a BES Index. This is calculated using single, easy to measure proxy variables for each of their 10 BES segments, with variable choice based on peer-reviewed science. In combination, these give an indication of ecosystem health...

Health measures for biodiversity and ecosystem services (Swiss Re)
Health measures for biodiversity and ecosystem services (Swiss Re)

Importantly, what this then allows is globally comparable, highly granular analysis, with a rating of ecosystem health applied to every square KM of land on our planet. Running on a scale from very poor health (dark red) to very high (dark green), this makes the magnitude of the challenge we face easy to see.

Global map of biodiversity and ecosystem health (Swiss re)
Global map of biodiversity and ecosystem health (Swiss re)

It's not just how much of our planet is in the red danger zone that is concerning, or that the places with fragile ecosystems in poor health also tend to correlate with high population density. It's that those parts of the world where ecosystems are at their healthiest are also the ones currently under greatest threat from resource exploitation - rather than trying to cure what ails our world we are doubling down on making it worse.

Which is why, from the perspective of minimising insurance risk, Swiss Re conclude that it's not just about reversing the damage we've already done that's important but protecting the natural world from the damage we have yet to do.

And when financial service giants are saying that, it's time for all of us to listen.

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