The Insurers' Federation of Egypt (IFE) has said there are three main challenges facing the insurance sector in the era of the low-carbon economy, namely, the lack of historical data on new risks, the difficulty of assessing climate risks and risks related to modern technology.
In its weekly bulletin, the Federation explained that the shift towards a low-carbon economy is one of the most significant developments that requires the insurance sector to reconsider its technical, underwriting and investment tools, in line with the nature of the risks and opportunities associated with climate change.
The IFE said that the Egyptian insurance market can enhance its role by developing insurance products that meet the needs of projects related to renewable energy and sustainable infrastructure, taking into account the technical characteristics of each project and the level of risks associated with it.
It stressed the importance of integrating environmental and climate considerations into the risk assessment and investment portfolio management processes of insurance companies, in addition to directing a portion of investments towards green financial instruments and sustainable infrastructure projects.
In particular, the IFE emphasised the importance of developing risk assessment methods at the local level, taking into account geographical differences and the nature of insured assets, and utilising data on past losses and claims, as well as available risk maps. Insurance companies can also enhance their risk prevention and management procedures in collaboration with clients, which will help improve underwriting quality, pricing, and the assessment of reinsurance needs.
The Federation believes that this transformation is no longer just an environmental option, but has become a strategic necessity that allows the sector an opportunity to expand its customer base and increase insurance penetration rates, through the creation of unconventional products that meet the needs of projects related to the low-carbon economy.
The IFE added that the role of insurance companies is not limited to confronting climate risks. Instead, it extends to supporting the transition to a green economy by financing sustainable projects, developing new insurance products, and encouraging low-carbon investments. Therefore, the insurance sector has become a key partner in achieving sustainable development goals and reducing carbon emissions.
Solar, wind and clean energy projects need specialised insurance coverage to protect them from operational, technical and natural risks. Insurance plays an important role in encouraging investors to inject capital into these projects by protecting them against potential losses and reducing investment uncertainty.
The presence of insurance also contributes to facilitating access to financing for projects from banks and financial institutions. By managing the risks associated with renewable energy projects, insurance helps to increase investor confidence and improve the chances of success of these projects in the long term. Thus, the insurance sector has become an essential part of the transition towards a green economy.