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Report ranks insurers' preparedness for addressing climate change risks

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October 20, 2016

22 of 148 insurers get top rankings for climate risk disclosure, but most are unprepared

OLYMPIA, Wash. – A new report from the nonprofit Ceres (www.ceres.org) ranks the nation's 148 largest insurance companies on their response to escalating climate risks, including severe weather events. The report finds that more insurance firms are disclosing climate risks and plans for managing them.

But most of the insurers evaluated are neither addressing climate risks, nor focusing on climate-change-related investment opportunities.

“The changing climate affects consumers’ homes, transportation, their health and in some cases can be life-threatening,” said Kreidler.

Washington state Insurance Commissioner Mike Kreidler is one of only six state insurance regulators who requires insurers to disclose the steps they are taking to address risks and perils that climate change poses. The other states requiring insurers to respond to the survey are California, Connecticut, Minnesota, New Mexico and New York.

“The changing climate affects consumers’ homes, transportation, their health and in some cases can be life-threatening,” said Kreidler. “I want to find out what insurance companies — among the largest economic sectors in our nation — are doing to prepare for the potential damage they are poised to pay for and if their assets will be stranded in carbon-based investments.”

The report, Insurer Climate Risk Disclosure Survey Report and Scorecard: 2016 Findings & Recommendations (PDF, 4MB), ranks property and casualty, life and annuity, and health insurers that represent about 71 percent of the total U.S. insurance market. The companies were given a quality ranking – high, medium, low or minimal – based on how they performed in relation to:

  • Governance.
  • Climate risk management.
  • The use of catastrophe or other modeling to manage risk.
  • Greenhouse gas management.
  • Public engagement.

The findings:

  • 22 companies earned a high-quality designation, up from nine companies in the 2014 report.
  • Of the 22 high-quality companies, 13 are based in the United States. In 2014, only two U.S. firms earned a high-quality ranking.
  • 16 of the 22 high-quality ranking firms are property and casualty insurers, which are directly exposed to climate risks through policies they write for homeowners, vehicles and businesses. The remaining six companies are life and annuity insurers.
  • The biggest insurers – those that write more than $5 billion in direct premiums – showed the most marked improvement.
  • 64 percent of the companies evaluated were ranked low quality or minimal. Health insurers, in particular, showed an ongoing lack of engagement with climate risk, despite growing scientific evidence on the health impacts of climate change, with 89 percent ranked as poor quality.

“I’m encouraged by the results of this survey, particularly by the quadrupling of improvement by U.S.-based companies,” said Kreidler. “But I am concerned that the vast majority of health insurers are largely unprepared to address the risks. With rising health care costs, health insurers would be well-served to look at the risk climate change poses to their business lines and investments.”

Since 2010, the OIC has partnered with other states to require insurers with a certain dollar amount of premiums to reply to a survey regarding their preparedness to address climate change risks.

Kreidler has long been an advocate of insurers being prepared to address the risks posed by climate change. He chairs the National Association of Insurance Commissioners’ Climate Change and Global Warming Working Group, which he’s been a member of since its start in 2006.

In 2015, Kreidler signed the Paris Pledge for Action and the OIC became a supporting institution for the United Nations Economic Programme Principles for Sustainable Insurance Initiative, the largest collaboration between the UN and the insurance industry.

In June 2016, Kreidler held a climate risk summit where reinsurers, insurers, policymakers, investment experts, and state climate-adaptation experts discussed insurers’ preparedness to address the risks and perils of our changing climate.

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