Insuring a Sustainable Economy
From insuring autos to covering environmental disasters like the BP oil spill in the Gulf, the insurance industry assumes risk for nearly every activity that drives our economy. That unique position enables insurers to play a leading role at mitigating the effects of climate change and speeding the transition to a more sustainable economy. But as storms and extreme weather events intensify, coastal populations rise, and the world transitions to a new energy economy, old models of insuring risk are quickly becoming obsolete.
Risks driven by climate change, water scarcity and other sustainability challenges are increasingly impacting insurers’ bottom lines. In 2010, abnormal weather patterns including increased flooding, wind storms, and extreme drought caused insurance providers to pay out nearly $40 billion in losses, part of an upward loss trend that giant reinsurer Munich Re attributes in part to climate change. Climate change is also introducing new litigation and regulatory risks for companies and their insurers, from ongoing litigation against carbon-intensive companies for the damaging effects of greenhouse gas emissions to the EPA’s pending greenhouse gas regulations for power plants and other large sources.
The risk models of the past may no longer be useful for adequately pricing insurance coverage or estimating claims. Yet insurance companies have an opportunity to create new risk models and adjust insurance pricing that more adequately addresses the risks of the 21st century. Some insurers are carving their niche in this new global market’s coverage for green buildings, renewable energy, carbon-capture and storage and carbon trading are being offered by more insurers than ever before.
Ceres is working with leaders and investors in the insurance industry to set new standards and expectations that can enable insurers to plan for these emerging risks while moving companies and individuals toward low-carbon activities.
In March 2009, with the help and support of Ceres, the National Association of Insurance Commissioners (NAIC) 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 companies are taking to respond to those risks. Read more...
In September 2011, Ceres released the report Climate Risk Disclosure by Insurers: Evaluating Insurer Responses to the NAIC Climate Disclosure Survey. This report is the first attempt to utilize the public NAIC disclosure filings from 88 companies to evaluate the extent to which U.S. insurers consider climate change a key risk factor to their business.
Ceres works with investors on a broad range of insurance activities. In response to the 2010 Deepwater Horizon oil spill in the Gulf of Mexico, for example, Ceres investor network members called on 26 insurance companies that provide insurance for offshore oil drilling activity to report on how they are reducing offshore drilling risks by adjusting their underwriting criteria or supporting regulations that would reduce offshore drilling risks.
Policy and Regulatory Action
Pay-As-You-Drive Auto Insurance
Ceres is helping produce for auto insurance that prices insurance policies based on the number of miles driven. The less you drive, the less you pay. Pay-As-You-Drive (PAYD) saves consumers money, reduces pollution and traffic congestion, and minimizes wear and tear on the road. In 2010 Ceres convened state regulators, auto insurers and advocates to create a performance standard for PAYD policies. Learn more...
One auto insurer, Texas-based MileMeter, qualifies for the Gold Standard. Ceres and its coalition partners Natural Resources Defense Council and Conservation Law Foundation hope to grow the number of PAYD products available to consumers across the U.S., and are advising insurers and states from California to Massachusetts on ways to grow the market for PAYD insurance products.
Green Building and Disaster Resilience
In 2010, Ceres and Travelers Insurance convened green builders and disaster resilience experts at the U.S. Capitol to discuss solutions for creating buildings that are both energy efficient and disaster resilient. These experts are exploring how and where to build buildings that both are responsive to climate, energy and water constraints and resistant to damages from weather and climate-related risks.
For more information, download "Linking Energy Efficiency and Disaster Resilience Retrofit Programs."
Education & Reports
Ceres produces cutting edge reports informing investors, regulators and corporate and industry leaders about the risks and opportunities for the insurance industry posed by climate change and other sustainability issues.
In 2010, Ceres, the Professional Risk Managers' International Association and Zurich Financial Services released Climate Change Risk Perception and Management: A Survey of Risk Managers. The survey is a first step in assessing whether and to what extent risk managers are concerned about the risks posed by climate change regulation and/or by climate change itself, and how well the insurance industry is or is not serving risk managers to transfer or manage the risks in this arena.
The Ceres report From Risk to Opportunity 2008: Insurer Responses to Climate Change outlines the insurance industry’s significant progress in developing wide- ranging products and services to help global consumers and businesses reduce their exposure to climate change—and to reduce the emissions causing global warming.
CERES ROADMAP FOR SUSTAINABILITY
Ceres has released The 21st Century Corporation: The Ceres Roadmap for Sustainability as a vision and practical roadmap for integrating sustainability into the DNA of all businesses, regardless of sector or industry. It analyzes key drivers, risks and opportunities involved in making the shift to sustainability and details strategies and results from companies who are taking on these challenges. The Ceres Roadmap is designed to provide a comprehensive platform for companies and investors alike to address sustainable business strategies and accelerate innovative solutions to improve corporate performance.
For more information
Download reports, listen to podcasts and read news related to the insurance industry at the top right of this page.
To learn more about how Ceres works with the insurance industry, or to get involved in Ceres' work, contact Sharlene Leurig, Senior Manager of Ceres Insurance Program.