Insurers Still Not Factoring Climate Change Risks Into Business Models

More than half of insurers that responded to a National Association of Insurance Commissioners (NAIC) climate disclosure survey  named market segments that may be affected by climate change. A third of the insurers surveyed mentioned climate-affected geographies in their portfolio. However, only 11 reported having formal climate change policies, and over 60 percent of the respondents do not have a dedicated management approach for assessing climate risk.

Ceres published a report based on analysis of the 88 leading insurers surveyed in 2010. The report is the first attempt to analyze the insurers’ responses. The analysis shows that insurers by and large are not factoring climate change risks into their business models.

“It’s important for shareholders to ask companies how they’re building this [climate change risks] into their business models,” Sharlene Leurig, author of the report, said in an interview with Reuters Insider. “By and large, the U.S. industry is very far behind the European companies,” Leurig added.

“The findings are both illuminating and disillusioning,” Ceres President Mindy Lubber writes in the report’s foreword. “While the survey revealed a broad consensus among insurers that climate change will have an adverse effect on extreme weather events, few insurers were able to articulate a coherent plan to manage the risks and opportunities associated with climate change.”

Majority of respondents think their companies are doing enough to manage climate change risks

None of the 18 property and casualty companies surveyed have formal climate change polices. This is disconcerting considering the recent destruction that the East Coast and Gulf Coast experienced due to Hurricane Irene and Tropical Storm Lee.

Over 40 percent of insurers that see their company developing climate risk exposure did not provide information on the potential effects climate change may have on the company’s pricing, capital adequacy or reinsurance requirements. Only 18 percent outline actionable steps being taken to manage the risks. In addition, only eight insurers cited liability exposure in their discussion of climate risks, mainly with respect to lawsuits filed against greenhouse gas (GHG) emitters to recover costs of climate-related damages.

Surprisingly, 82 percent of respondents described their company’s present diversification, reinsurance coverage and annual contract terms as sufficient for managing the risks of climate change. Less than 15 percent said their investments have definite exposure to climate risk, and 50 of the 88 respondents do not have a plan to reduce their operational GHG emissions.

The report’s recommendations for insurers

The report lists recommendations for insurers to include climate change risks into their business models. The recommendations include:

  • Implement mandatory disclosure annually and make all survey responses public
  • Clarify disclosure expectations
  • Create more shared resources to help insurers analyze and respond to climate-related risks and opportunities

Leurig recommended that insurers work with their loss modelers to make their models more forward looking.

Photo credit: Flickr user, NASA Goddard Photo and Video

Gina-Marie Cheeseman

Gina-Marie is a freelance writer and journalist armed with a degree in journalism, and a passion for social justice, including the environment and sustainability. She writes for various websites, and has made the 75+ Environmentalists to Follow list by

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