Ludovic Subran, chief investment officer of Allianz Group, and Christian Kroll, visiting professor at the London School of Economics (LSE), emphasized in the World Economic Forum report that the insurance industry plays a central role in combating climate risks, economic instability and social inequality.
The Forum noted that while skepticism about environmental, social and governance (ESG) strategies has increased, this backdrop provides opportunities for insurers to integrate sustainable practices into their business models. Research from the World Economic Forum explains that the insurance industry is particularly vulnerable to the impacts of climate change in its operations, giving it the opportunity to set an example for other industries.
The forum said that “a virtuous cycle of profitable insurance and resilient sustainability is possible” and that addressing climate risks can enhance business success.
The report highlights the scale of the challenge: extreme wildfires have more than doubled over the past two decades, and climate-related losses could reach $38 trillion per year by 2050. Insurers who have traditionally focused on transferring financial risk now have the potential to play a more active role in preventing losses and supporting wider social resilience. Allianz 2025 research cited by the forum shows that the insurance industry can be a key part of the solution while maintaining profitability.
As the World Economic Forum points out, insurance companies manage a significant portion of global capital, which allows them to influence investment in sustainable initiatives. The Forum’s analysis emphasized that risk management, which is at the core of the insurance business, is closely related to the challenges faced by the United Nations Sustainable Development Goals (SDGs), including climate change, health emergencies and social instability. By understanding these connections, insurers can protect their operations while improving broader social resilience.
The World Economic Forum also reports that there is a strong correlation between insurance coverage and progress on the Sustainable Development Goals. In property and casualty (P&C) insurance, a 1% increase in coverage is equivalent to a 5.8% increase in SDG performance.
However, current global trends reveal a negative cycle: low insurance coverage increases vulnerability, exacerbates economic instability, and exacerbates climate risks. The Forum emphasized that expanding coverage can create a positive feedback loop and increase the resilience of entire societies and economies.
According to the World Economic Forum, the cycle works like this: When more risks are insured, insurers are incentivized to invest in preventive measures, which often cost less than compensating for losses. This reduces the frequency and severity of claims, stabilizes premiums, and builds public confidence. As trust grows, insurance coverage expands, further enhancing resiliency and profitability.
The World Economic Forum highlights historical examples of how insurance can reduce social risks. In Europe, the widespread availability of fire insurance in the late 19th and early 20th centuries led to safer urban planning, stricter building codes, and investments in fire protection systems.
Insurers fund fire brigades, early warning systems and safer building standards, which expands the insurance market while reducing losses. A similar situation has emerged in Japan and New Zealand, where earthquake insurance has driven stricter building codes and proactive risk management. The forum pointed out that these examples show how large-scale insurance markets can change society’s risk exposure.
The World Economic Forum report highlights that similar approaches can now be used to address climate and sustainability challenges. By integrating climate science into premiums and underwriting, insurers can guide the industry towards adopting low-carbon and climate-resilient technologies.
Communities with higher insurance coverage typically invest more quickly in flood protection and nature-based adaptation measures. Broad coverage can also reduce inequality by linking social stability, economic productivity and environmental sustainability by preventing households from falling into poverty after shocks.
With more than $30 trillion in assets under management, the insurance industry can also channel capital into transformative projects. The report highlights that investments in green infrastructure, renewable energy and social impact initiatives can accelerate progress towards multiple SDGs. For example, sustainable housing supports SDG 11 (Sustainable Cities and Communities), microinsurance schemes build resilience and reduce inequalities (SDG 10), and flexible policy measures that respond to client needs help promote gender equality (SDG 5).
The Forum’s report suggests actionable strategies for insurers, including developing repeat-focused products and expanding coverage for vulnerable groups. Regulators are also central to achieving sustainable insurance practices. The World Economic Forum said policies such as tax incentives, public-private partnerships and mandatory ESG reporting could encourage insurance companies to integrate long-term social and environmental considerations into their operations.
The World Economic Forum concluded that achieving the SDGs requires coordinated action by insurers, regulators and cross-sector partnerships. By leveraging their ability to manage risk, mobilize capital and support resilience, insurers can take the lead in creating a sustainable, stable and equitable future.
