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‘Vast majority’ of insurers showing poor response to climate risk


October 28, 2014   by Canadian Underwriter


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ACE, Munich Re and Swiss Re are among the insurance companies ranked highest in terms of their response to climate change, though the “vast majority” of other firms are doing poorly, according to a new report from nonprofit sustainability advocacy group Ceres.

The report ranks the 330 largest insurance companies operating in the United States, representing roughly 87% of the total insurance market, on climate related indicators including governance, risk management, investment strategies, greenhouse gas management and public engagement (such as positions on climate policy).

The report is based on company disclosures last year in response to a climate risk survey developed by the National Association of Insurance Commissioners (NAIC).

Based on responses, the firms were ranked based on a 100-point scale and graded as either “leading,” “developing,” “beginning” or “minimal.”

Among those considered to be leading in their responses were ACE, Allianz, the Hartford, Swiss Re, Munich Re, Prudential, Sompo Japan, XL Group and Zurich.

Meanwhile, 276 of the 330 companies earned either “beginning” or “minimal” ratings, with the heath and life and annuity insurers showing especially weak responses, with 89% and 80%, respectively, receiving the lowest “minimal” rating.

“Despite being on the ‘front line’ of climate risks, most of the company responses show a profound lack of preparedness in addressing climate-related risks and opportunities,” Mindy Lubber, president of Ceres, commented in a statement on the report’s findings.

“A big positive in the report’s findings is the strong leadership among a small number of property and casualty insurers – a trend that needs to become far more mainstream if the industry is to accelerate global responses to this colossal threat.”

Still, among P&C insurers, only eight of 193 firms had a “leading” rating, and only 20% had a “developing rating,” Ceres said.

And while P&C insurers bear many of the costs associated with climate risks (such as storm damage), climate change does have implications for life and annuity insurers, especially in terms of mortality rates and those firms’ investment portfolios, Ceres noted.

“L&A firms have trillions of dollars of investments – roughly two-thirds of the U.S. insurance sector’s total cash and invested assets – that may be affected by wide-ranging climate-related ripples across the economy, including physical impacts, carbon-reducing regulations and fast-growing clean energy opportunities,” Ceres said.

The full scorecard report, which also includes recommendations for regulators, is available to download from the Ceres website.