This report is the first systematic review of U.S. insurance companies’ climate risk strategies, yielding new insights that risk managers and regulators can use to maintain a sustainable insurance sector.
Insurance companies are exposed to accelerating risks from the climate crisis, with costs from increased losses skyrocketing. Since 1980, the number of billion-dollar weather disasters from severe storms to heat waves to wildfires, has hit 357, costing more than $2.54 trillion in total. These impacts have significant consequences for individuals and businesses, threatening the availability and reliability of insurance — a critical tool for hastening recovery.
This report from Ceres and the California Department of Insurance, the largest U.S. state insurance regulator, reviews over 400 responses from insurance companies to the National Association of Insurance Commissioners’ 2021 Climate Risk Disclosure Survey. The survey, designed to help regulators gain a window into how insurers manage climate-related risks, was aligned with the Task Force on Climate-related Financial Disclosures (TCFD) framework for the first time in 2021. In 2022, fifteen U.S. state insurance regulators implemented Climate Risk Disclosure Survey, receiving responses from more than 1,500 companies representing over 80% of the U.S. insurance market.
The goal of this analysis, which used two independent methods to review the responses, is to provide insights that may be helpful for other insurers in developing their climate-related disclosures and to encourage improvement in the comprehensiveness of those disclosures.
The analysis shows that insurance company responses to the Climate Risk Disclosure Survey demonstrate diverse, and sometimes sophisticated, approaches to climate risk management.
Key Findings
The 2022 Climate Risk Disclosure Survey achieved a very high rate of response from insurance companies. There were examples of insurers across all types of business (Property & Casualty, life, health, etc.) and sizes that provided detailed disclosures according to the TCFD recommendations.
78% of the responses provided disclosure that broadly aligned with 6 or more of the 11 TCFD recommendations.
Over 95% of the responses provided information that broadly aligned with the Risk Management and Strategy Pillars of the TCFD.
Less than 40% of the responses provided information that broadly aligned with the Metrics & Targets Pillar.
Nearly 20% of the reports mention scenario analysis explicitly but not all reports specify for which risks.
Around 12% of the reports stated their scope 3 emissions (indirect emissions from the value chain), giving specific values often for multiple consecutive years.
Insurers are offering a variety of new products that support risk reduction among their customers or that support clean technology.
Many insurers describe managing any material climate risk through their enterprise risk management process.
Ceres commissioned Manifest Climate to analyse the reports of 15 of the companies and groups that addressed all or almost all of the 11 TCFD recommended disclosures, against specific recommendations of the TCFD framework. The Detailed Analysis of 15 Companies highlights areas of their disclosures that were informative, comprehensive, and effective for both investors and peer companies.
The Ceres TCFD analysis dashboard from Manifest Climate offers an interactive database to examine and analyze the individual disclosures of the selected 15 companies against more than 200 climate risk action items. Read this guide on how to navigate the dashboard.
Explore the metadata for additional details on the analysis of the 2021 NAIC Climate Risk Disclosure Surveys using the complimentary methods of review including the machine learning-based algorithm from Manifest Climate and the rules-based text mining approach implemented by the California Department of Insurance and developed by researchers at Banco de España.