Insurers should increase disclosure of climate change initiatives: ICLR director

All insurers should make the effort to answer the same eight questions about climate change initiatives that the U.S. regulator requires insurance companies in its jurisdiction to answer annually, said Paul Kovacs, founder and executive director of the Institute for Catastrophic Loss Reduction.
Kovacs spoke at the Autorité des Marchés Financiers’ Rendez-Vous in Montreal on Oct. 26.
The U.S. regulator asks the following eight questions:
•    What actions have you taken to assess and reduce emissions?
•    How does your risk management strategy address climate change?
•    What actions have you taken to identify and assess climate risks?
•    Summarize the climate change risks for your company.
•    How will climate change affect your investments?
•    What actions have you taken to encourage policyholders?
•    What actions have you taken to engage other stakeholders? and
•    How do tools like models help you manage climate risks?
“The growing frequency and severity of extreme weather events is transforming the property insurance business,” Kovacs said.
“For example, severe weather disaster claims paid by property insurers increased twenty-fold since the 1970s, an alarming and unsustainable trend.”
In Canada, the number of insured property damage claims related to severe weather has increased steadily over the past four decades. “Indeed, severe weather claims now exceed fire damage claims,” Kovacs said.
Insurance companies need to understand and address the risk that climate change poses to claims severity and frequency, he said. In addition, more emphasis is being placed on corporate social responsibility and sustainability reporting by investors and consumers, Kovacs said.
If insurers provided more information about the actions they are taking, and if they offered more advice and information to consumers on how they can help to prevent climate change, it would “show that insurance companies are leading the effort to help property owners better manage this important risk,” Kovacs said.