Climate change and its impact on the insurance industry : a perspective for Malta

Abstract

Climate change has been debated for many years and is no longer considered a scientific and environmental topic. It now heads the list of risk management and socio-economic development, becoming one of the top global concerns. There is global concern that the variation in warming is due to increased human activities that have destabilized the planet's climate. Wildfires in Sweden, temperatures of over 30 degrees Celsius in the northern Arctic Circle, heat and drought in central Europe, Asia and North America. There are changes in the global climate of the planet. The Mediterranean region has experienced an average temperature rise of 1.4 degrees Celsius (°C) since the pre-industrial era; 0.4°C more than the global average. Even if future global warming is limited to 2 degrees Celsius (°C), which was depicted by the Paris Agreement, rising temperatures in summer are expected to reduce rainfall to around 10-30% especially in southern regions. This would lead to water shortages and decrease production of agricultural sector. The demand for irrigation is expected to increase between 4-18% by the end of the century. Growth in the population growth will escalate demand estimated by a further 22-74%. This population increase, industry and urban development create threats to water pollution. Public health will also be threatened by heat waves, pollution and the increased spread of disease vectors. The United Nations’ Intergovernmental Panel on Climate Change estimates, that the Paris Agreement’s goal of limiting the temperature increase to 2 degrees Celsius (°C), will require an estimated $3 trillion of investment every year to 2050. The investment required by governments and the private sector has led to the introduction of green bonds which has now reached about $1 trillion. The European Union has introduced Regulations on Taxonomy and Disclosures to establish a framework to facilitate sustainable investment which should contribute to the United Nations Sustainable Development Goals and the Paris Agreement. The Markets have responded positively easing the path for green investments. The Luxembourg Green Exchange (LGX) leads the platform for green, social and sustainable securities, currently holds 50% of all listed bonds. Malta introduced rebate schemes on electric and hybrid vehicles and the installation of solar panels and renewable energy. The Malta Stock Exchange offers incentivises to investors that issue Green Bonds and contribute to Malta's commitment for the Low Carbon Development Policy. In conclusion, the framework for economic trade and incentivised sustainable financial products contributes to the creation and maintenance of sustainable economy.