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U.S. insurance firms failing to address climate change risk -report

by Reuters
Tuesday, 21 October 2014 22:00 GMT

Floodwaters engulf parts of the R.M. Clayton Sewage Treatment Plant in Atlanta, Georgia, in this aerial view taken Sept. 23, 2009. REUTERS/David Tulis

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Survey finds only 10 percent of companies have issued public statements on climate risk management

By Valerie Volcovici

WASHINGTON, Oct 21 (Reuters) - Most U.S. insurance companies are completely unprepared to address the risks related to climate change, a new survey published Wednesday found, a finding that could have negative consequence for the wider debate over how to tackle the issue.

Environmental investor advocacy group Ceres conducted a survey of 330 insurers representing 87 percent of the U.S. insurance market to weigh how they respond to climate change based on their governance structures, climate risk management programs, use of computer modeling, stakeholder engagement and measuring and reducing greenhouse gas emissions. (Report: http://bit.ly/1uAKfeY)

Of those companies, only 10 percent had issued public climate risk management statements -information that explains how companies understand climate science and how they approach core underwriting and investment portfolios.

"Given the insurance sector's key role in addressing societal risks, this near total silence on climate change is deeply troubling and is thwarting constructive public engagement on appropriate responses," the report said.

Insurance is one of the most exposed industries to climate change.

Property and casualty insurers - those at the "front line" of climate risks - have the highest ratings in the survey compared with health or life and annuity insurers, but they are "not addressing climate risks comprehensively," the survey found.

Because property and casualty insurers tend to limit coverage or withdraw from disaster-prone areas, like coastal regions, they shift responsibility and risks to local communities and institutions.

"In the long run, these coverage retreats transfer growing risks to public institutions and local populations, and reduce the resiliency of communities, which are less able to finance post-disaster recoveries," according to the report.

Nine property and casualty insurers - ACE, Allianz , the Hartford, Munich Re, Prudential, Sompo Japan, Swiss Re , the XL Group and Zurich Insurance - were ranked the "leading" performers.

The majority insurers surveyed - 276 of the 330 - earned "beginning" or "minimal" ratings.

The Hartford and Prudential were the only two U.S.-headquartered companies on the list.

Cynthia McHale, lead author of the report, said that U.S.-based companies have been more reticent to adopt aggressive approaches to addressing climate risk compared with European and even some Asian counterparts.

For one, climate change has become so politicized in the United States that the conservative insurance industry tends to keep a lower profile on climate and avoid wading into the prickly energy policy debate, she said.

She added that some companies are concerned that some of their insured customers may be sued over climate risks.

"In showing in this report that we have small but certainly very substantial and highly regarded insurance companies that are really leading and being quite affirmative we might break the logjam where science alone won't motivate companies on climate action," she said. (Reporting by Valerie Volcovici; Editing by Lisa Shumaker)

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