The circular transformation that many companies are committed to relies on increasing levels of recycled materials. In July 2023, Ikano Group, in cooperation with Swiss Re, AXA, Ingka Group and BCG, published a white paper: What goes around comes around: Insuring the circular economy, highlighting the obstacles to this process.

The report outlines the challenges being faced by recycling companies as many large corporations are now starting to focus on the recycling sector, where they are seeking to achieve sustainability goals through commitments to circularity and investments in the industry. But growth in recycling capacity requires sufficient insurance cover, including property insurance and business interruption cover. Acquiring such insurance in the sector is not easy, partially due to previous fire incidents caused by the high combustibility and unpredictability of recycled materials. These large losses have resulted in limited coverage and high premiums for recyclers.    

Alena Farkova, Corporate Partnership Client Manager at Swiss Re, said: “We have examined the insurability challenges from the recycling, investor and re/insurance industry point of view. Currently, the risk management and asset protection of recycling companies tend to have inadequate, driving the limited re/insurance capacity, limited coverage and high insurance prices. We believe closer collaboration and increased transparency on adequate protection measures could help in addressing this issue, supporting the growth of circular business models.” 

IKEA is committed to becoming a circular business by 2030 and Ingka Group is exploring how it can best contribute to this shift. Per Stolz, Circular Specialist at Ingka, said: “Many large companies, including IKEA, have committed to ambitious circularity goals, which will ultimately drive demand for recycled materials. To facilitate the circular transition, and ensure we are all on track for net zero by 2050, global recycling rates need to be 80-90% by 2040. The white paper highlights that the future availability of recycled materials in the quantities needed could be threatened by lack of insurance.”  

Close stakeholder collaboration alongside improved risk understanding can drive insurability and enable growth. Angela Mall, CEO, Ikano Re AG, said: “Given the past loss experiences, re/insurers require in-depth and regular property assessments of recycling facilities, which drives insurance costs up even more. Nonetheless, such assessments will remain essential to develop and maintain the insurability and operability of recycling assets. Strong collaborations and partnerships in risk management can prevent large losses and enable appropriate protection, improving the risk quality of the recycling industry as a whole.”

View the recorded webinar from 25 August to learn more: What goes around comes around: How to insure the circular economy | Swiss Re

Link to report: What goes around comes around: Insuring the circular economy | Swiss Re