Insuring Nature’s Survival: The Insurance Industry’s Next Existential Crisis
If you want to know what’s about to shake the world, don’t look at politicians. Look at insurance companies. They are the world’s professional risk assessors — the canaries in the coal mine of global finance. And right now, their models are flashing red for something bigger than just climate change: biodiversity collapse.
Here’s why this matters. Over Fifty percent of global GDP — $44 trillion — depends on nature. That’s not an abstract environmental concern; it’s the economic foundation of everything we take for granted. The crops that feed us, the forests that regulate rainfall, the coral reefs that protect coastlines, and the pollinators that keep food systems running — all of it underpins the stability of global markets.
But that foundation is cracking fast. The planet is losing biodiversity at unprecedented rates. Species are disappearing, ecosystems are degrading, and the natural systems that buffer our world from disaster are being pushed to the brink. The result? More extreme weather, more economic disruption, and a rising tide of uninsurable risks.
And who picks up the tab when nature collapses? Insurance companies.
The Numbers Don’t Lie: Insurance is Losing the Biodiversity Gamble
Consider this: Last year, top insurers suffered $10.6 billion in climate-related losses — almost wiping out the $11.3 billion they earned from fossil-fuel premiums. That means the same companies underwriting oil, gas, and coal projects are now bleeding cash from the disasters those industries fuel.
Over the past 20 years, climate change has cost the insurance industry $600 billion, making up a third of all insured weather losses. The trend is getting worse: climate-related payouts have jumped from 31% of total insured weather losses a decade ago to 38% today.
Swiss Re, one of the world’s largest reinsurers, estimates that 2024’s insured losses from natural catastrophes will top $135 billion — the fifth straight year of breaking the $100 billion mark.
And that’s just climate change. When you add biodiversity loss into the equation, it gets even uglier. Destroy a wetland, and you increase flood risks. Cut down a forest, and you disrupt water cycles. Overfish a reef, and you expose coastlines to devastating storms. Every time we degrade an ecosystem, we amplify economic risk — and insurers are left holding the bill.
Why This is an Existential Crisis for Insurance
Insurers understand risk. But they are still failing to price in biodiversity risk — and that’s a ticking time bomb. According to MSCI ESG Research, 37% of the world’s biggest companies have physical assets in biodiversity-sensitive areas, yet 13% lack adequate policies to mitigate their impact. That’s not just bad for the planet — it’s a financial liability waiting to explode.
Here’s how biodiversity loss is already destabilizing the insurance market:
- Flood Insurance — In 2021, floods caused $82 billion in global economic losses, yet only 25% was covered by insurance. Every 10% increase in deforestation raises flood risk by 4–28%.
- Crop Insurance — Pollinator loss, soil erosion, and drought are crippling food production. The decline of bees and other pollinators alone could wipe out $235 billion in annual food output, raising claim payouts for agricultural insurers.
- Liability Insurance — Companies that destroy biodiversity are increasingly facing legal action, and insurers that cover them may be forced to foot the bill for ecological restoration.
- Life & Health Insurance — One new medicine is lost every two years due to biodiversity decline. This will drive up healthcare costs, increasing claims in life and health insurance markets.
The world’s economic and financial systems aren’t built to handle biodiversity collapse. If insurers don’t act now, the cost of insuring biodiversity-related risks will outstrip their ability to pay. And at that point, the entire industry becomes unviable.
The Post-Carbon Insurance Model: Nature as an Asset
The old insurance playbook — write policies, assess risk, pay claims — is breaking down. To survive in this new world, insurers need a post-carbon model where nature itself is recognized as an asset class.
Here’s what that could look like:
1. Using Spatial Finance & AI to Price Biodiversity Risk
Leading insurers already use geospatial analysis to assess climate risks. The next step is layering biodiversity data into underwriting models. AI-powered tools like digital twins, remote sensing, eDNA monitoring, and bioacoustics can help insurers predict where biodiversity loss will drive higher claims and financial instability.
2. Nature-Based Insurance Solutions
Just as parametric insurance pays out when hurricane wind speeds reach a threshold, biodiversity-linked insurance could trigger payouts when ecosystems degrade past a critical point. This would create financial incentives for businesses and governments to invest in conservation before disasters strike.
3. Redirecting Capital to Nature-Based Solutions
Insurers control some of the world’s largest investment portfolios. If they redirected even a fraction of that capital into biodiversity restoration and regenerative projects — like reforesting watersheds, restoring coral reefs, or expanding pollinator habitats — it would reduce long-term risk exposure and stabilize the ecosystems that keep markets functioning.
Some insurers are already making moves. In 2020, Lloyd’s of London pledged to stop underwriting coal, oil sands, and Arctic drilling projects by 2022 and to exit fossil fuel insurance entirely by 2030. The Net-Zero Insurance Alliance, which includes Axa, Allianz, Aviva, Munich Re, and Zurich, is committing to transition their portfolios to net-zero by 2050.
But right now, these are isolated efforts. If insurers don’t scale up and standardize biodiversity-positive investments, they will keep losing money as their risk models collapse.
The Future: Insuring Regeneration, Not Just Risk
The hard truth is this: The insurance industry cannot survive in a world where nature fails. If insurers don’t start factoring biodiversity into their risk models, they will soon face losses that dwarf today’s climate-related disasters.
The choice is clear:
- Continue underwriting destruction, watching claims skyrocket and coverage become unviable.
- Invest in nature as a financial asset, reducing long-term exposure and stabilizing global risk models.
The first model is a race to the bottom. The second is the foundation of a new insurance paradigm — one where protecting nature isn’t just good for the planet, but essential for financial survival.
Insurers have the power to reshape global markets.
The only question is:
Will they act before it’s too late?
