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Insurance Sector

Climate change will impact nearly every segment of the insurance industry, including property damage (increased losses from severe weather), health and life (global disease spread and loss of life from severe weather), corporate directors and officers (companies potentially held liable for greenhouse gas emissions) and invested assets (insurers' massive investment portfolios contain embedded climate risk).

The insurance industry is well-positioned to help bring about solutions to the climate change problem. Insurers have significant leverage over the companies responsible for climate change by virtue of their underwriting criteria and pricing. The insurance industry is also a trusted voice on risk issues, and is able to speak with authority before policymakers. Insurers like Swiss Re played a major role in convincing the European Union to take the issue of climate change seriously. Ceres believes that a similar potential exists in the United States.

In the late 1990s, to cite one example of this industry's influence, U.S. insurers became concerned over the potential liability they might face around a possible Y2K computer calamity. Insurers either excluded coverage for Y2K issues altogether or required companies to disclose in detail their plans for managing the issue. This prompted the Securities and Exchange Commission to require all companies to disclose their Y2K preparation plans which, in turn, led to major corporate investment s that stopped the problem from occurring. Swiss Re has taken a similar approach on climate change, asking each of its directors & officers insurance clients how their companies plan to manage climate risk. Unfortunately, U.S. insurers have not followed Swiss Re's lead. Ceres believes that were they to do so climate change would quickly rise on the agenda of every corporate board in the U.S.

Ceres is working with our investor and environmental advocacy allies to engage and educate senior leadership of U.S. insurers about climate risk, with the goal of turning insurers into allies on climate change. Ceres is seeking:

improved disclosure by insurers on their exposure to climate risk. This will help focus the attention of the industry, as well as the financial markets, on the magnitude of the risk and the need to work toward solutions.
better integration of climate risk into underwriting criteria and client engagement. Insurance companies and brokers have significant influence over their corporate clients' behavior by virtue of how they write their underwriting criteria (conditions, exclusions, etc.) and the work they do with those clients to help them mitigate risk.
constructive engagement in the public policy process.

Unlike most industries, insurance is regulated on a state-by-state basis. Because these regulators are charged with overseeing the long-term viability of the industry, climate change -- which insurers like Swiss Re have said threatens the industry's long-term solvency -- is potentially an area of major concern for state regulators. Ceres is working with individual state regulators and through the regulators' trade association (the National Association of Insurance Regulators), to raise the profile of climate change and encourage a constructive response.

Contact

For more information, please contact Andrew Logan, Director of Oil and Insurance Programs, at 617-247-0700 x133 or logan@ceres.org

SPOTLIGHT

Drive Less, Pay Less: Environmental and Transportation Groups Unveil Performance Standard for Pay-As-You-Drive Auto Insurance
December 9, 2009 - Today at the National Association of Insurance Commissioners’ Winter Meeting, Ceres and a diverse group of transportation and environmental organizations unveiled a proposed performance standard to rate Pay-As-You-Drive (PAYD) auto insurance policies in the U.S., which save consumers money when they reduce their vehicle travel. More

Download the Pay-As-You-Drive Recommended Standards 1-Pager

Download the Pay-As-You-Drive Technical Report

NEWS & EVENTS

Huffington Post on 12/14/09: Drive Less, Pay Less: Win-Win for Consumers & Climate
Mindy Lubber of Ceres blogs about the benefits of a car insurance based on the miles you drive. Pay-As-You-Drive (PAYD) was a hot topic at the National Association of Insurance Commissioner's Climate Risk Summit in San Francisco last week. Read More

Regulators Require Insurers to Disclose Climate Change Risks and Strategies
March 17, 2009 - The National Association of Insurance Commissioners (NAIC) today approved a groundbreaking mandatory requirement that insurance companies disclose to regulators and investors the financial risks they face from climate change, as well as actions the companies are taking to respond to those risks. More

RESOURCES

From Risk to Opportunity 2008: Insurer Responses to Climate Change

April 2009 - Hundreds of new insurance initiatives, including coverage for green buildings, renewable energy, carbon risk management, and officers’ liability are being offered to tackle climate change and rising weather-related losses in the U.S. and globally, according to this report by the Ceres investor coalition.

Download Report