Climate change a 'fundamental threat'
Friday, September 09, 2011 7:00 AM
Relatively few insurers have formal policies in place to address the increasing risks that may be brought about by climate change, according to a new report issued last week by Ceres, a Boston-based nonprofit sustainability group.
The report also concluded that the insurance industry is focusing most of its attention on coastal risks, such as hurricanes, and ignoring non-coastal extreme weather risks that could prove to be significant. The United States had already tied a yearly record for billion-dollar weather disasters (floods, tornadoes and heat waves) before the first hurricane landfall of 2011, according to the report.
“Our fear is that climate change poses a fundamental threat to the long-term availability and affordability of insurance,” said Jack Ehnes, CEO of the California State Teachers’ Retirement System. Climate change may also threaten the performance of the insurance industry’s $23 trillion investment portfolio.
Of 88 leading insurance companies surveyed, only 11 had formal climate change policies in place, and more than 60 percent of the respondents reported having no dedicated management approach for assessing climate risk. The survey was conducted in six states and did not include any Iowa-based companies.
Insurers and reinsurers “are not meteorologists,” said Ron Hallenbeck, president of EMC Reinsurance Co., in reaction to the report. “Insurers are highly regulated, and to the extent there is climate change affecting loss costs, such loss costs will eventually be reflected in the premiums charged,” he said. “Rate changes, however, tend not to fluctuate significantly in the short term as insurance is a very competitive industry.”
Hallenbeck further said that EMC and many other insurers are cognizant of the potential for investment portfolios to exacerbate underwriting risks, and take steps to reduce that risk, such as avoiding significant investments in other insurance companies.
Click here to view chart of costliest U.S. disasters.
To view the Ceres report, “Climate Risk Disclosure by Insurers, go to http://www.ceres.org/resources/reports/naic-climate-disclosure/view
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