July 22, 2013, by Kieran Cooke
Hurricane Sandy was here: More insureres must now disclose climate-related risks
Image: Brett Perkins via Wikimedia Commons
EMBARGOED until 2301 GMT on Monday 22 July Two more US states say they will require insurance companies to reveal how prepared they are to cope with risks related to climate change. LONDON, 23 July – The US insurance industry has been reluctant to recognise the dangers posed to its customers – and its revenues – by a warming climate. Now there are signs that attitudes in the multi-billion dollar sector are slowly beginning to change. In the last week the states of Connecticut and Minnesota announced they would be adopting regulations applying in California, New York and Washington states which require insurance companies to fully disclose their readiness to deal with climate change-related risks. “As insurance regulators, it is important that we identify those climate-related factors that can affect the marketplace and in particular the availability and cost of insurance”, says Thomas B. Leonardi, Connecticut’s Insurance Commissioner. Elsewhere in the US, insurers seem unwilling to contemplate the implications for their businesses of changes in climate. While some states, particularly California, have been pressing insurers to be more aware of the dangers posed by climate change, the remaining 45 states have so far refused to adopt the disclosure requirements. Under the regulations, insurance companies operating in the states involved and who have more than $100 million in premiums under their control have to answer a survey which measures their response to the impact of climate change. Questions range from carbon footprint reduction plans to risk management in a changing environment. Ceres, a US organisation which promotes more environmentally sustainable business practices, says that while 2012 was the warmest year on record across much of the country and the second most extreme weather year in US history, many in the insurance industry are only just beginning to think about how to address the effects of climate change on their business. In a report earlier this year analyzing the results of a survey in those states requiring climate change disclosure, Ceres said that of the 184 companies reporting, only 23 had comprehensive climate change strategies: of those 23 companies, 13 are foreign-owned.
Ceres says only certain sectors in the insurance industry, such as those specializing in property and casualty, seem to fully understand the risk that climate change poses to their business. “In fact, every segment of the insurance industry has climate risks. Life insurers, for example, own hundreds of billions of dollars worth of real estate in vulnerable coastal areas.” Mindy Lubber, the Ceres president, says the implications of what she calls the highly uneven response of insurers to the dangers of climate change are profound. “…The insurance sector is a key driver of the economy. If climate change undermines the future availability of insurance products and risk management services in major markets throughout the US, it threatens the economy and taxpayers as well. “Just as the insurance industry asserted leadership to minimize building, fire and earthquake risks in the 20th century, the industry has a huge opportunity today to lead in tackling climate change risks”, says Lubber. – Climate News Network
Kieran Cooke, a founding editor of Climate News Network, is a former foreign correspondent for the BBC and Financial Times. He now focuses on environmental issues