What does the UK Nature Opinion mean for the insurance sector?

The UK Nature Opinion clarifies that, under UK Companies Act 2006 (CA 2006), directors must consider nature-related risks as part of their existing duties of loyalty and care. For insurance companies, this has particular significance. Nature-related risks are already financially material to many insurers (Annex 2 in the full briefing provides a visual representation of how nature-related risks can create financial risks for the insurance sector). In a survey conducted by the Sustainable Insurance Forum (SIF), almost 50% of insurers surveyed recognised nature risks as financially material to their underwriting business. Given that most of the sector’s nature-related risks arise through underwriting portfolios rather than direct operations, the identification and assessment of nature-related risks must be embedded within core underwriting and risk management activities; for insurers, this means systematically evaluating nature-related physical, transition and legal risks across lines of business, geographies and counterparties.

Directors should also consider nature-related risks across the insurer’s entire balance sheet, including both underwriting and investment activities. Inconsistent
approaches – for example, underwriting policies that restrict high nature-impact activities while investment portfolios remain exposed to the same sectors – could undermine claims that the board has properly assessed and managed nature-related risks under sections 172 and 174.

There are several measures outlined in guidance from the UNEP FI that directors in the insurance sector can take to demonstrate compliance with their legal duties:

• Governance structures: Governance structures should ensure that nature-related risks receive board-level oversight, with regular discussions on emerging risks and their implications for customers, financial stability, and long-term insurability. A February 2026 report by MSCI found that governance oversight exists amongst insurers, but accountability remains weak – 69% of insurers globally reported that climate considerations were not integrated into executive performance or incentive structures.
• Integrate nature into existing frameworks: Integrating nature into underwriting guidelines, risk appetite statements and ESG policies – rather than treating it as a siloed sustainability issue – will be an important evidential step in showing that relevant risks have been identified and assessed. It is important to understand the relationship between climate and nature. It is important that risk modelling does not underestimate interlinking and systemic risks.
• Identify priority actions: High-risk sectors or biodiversity sensitive locations should be subject to enhanced scrutiny.
• Engage with clients: Although insurers do not control their clients’ operations, they can exert influence through underwriting decisions and renewal processes. Engagement strategies can be broadened to include nature. Before renewals, insurers can review clients against nature-related policies, set clear expectations (e.g., on operations in protected areas or high-impact sectors), and establish escalation or offboarding processes for persistent non-compliance.
• Implement measures to reduce risk exposure: Reliance solely on annual contract reviews and premium adjustments may be insufficient. These tools can manage short-term exposure but may overlook long-term threats to insurability and profitability. The UK Nature Opinion underscores that directors must consider longer-term success. This may require moving beyond risk transfer to risk reduction – encouraging biodiversity risk assessments, adoption of nature-based solutions etc., among insureds. Embedding such measures within policy terms can reduce insured losses and support resilience (e.g., regenerative agriculture practices leading to lower crop insurance risk).

In practical terms, the UK Nature Opinion raises the governance bar for directors in the insurance sector. Nature-related risks must be treated as financially relevant, systematically assessed within underwriting and investment activities, and actively managed through robust governance, documentation and engagement. Doing so is not only consistent with evolving market and regulatory expectations, but integral to complying with directors’ existing legal duties and safeguarding the long-term success and resilience of the insurance business.

Read the full briefing for a clear overview of the risks and opportunities, and download the board discussion prompts to support critical conversations within your boardroom and with your executive.