The insurance industry is not very prepared for climate change, according to the “Insurer Climate Risk Disclosure Survey: 2012 findings & recommendations,” from the Ceres Coalition. The report summarizes responses from insurance companies to a survey on climate risk developed by the National Association of Insurance Commissioners.
Almost all respondents show significant weakness in their preparedness to address the effects climate change, Ceres said. Smaller companies generally were less prepared than larger companies. However, P&C insurers, including multiline, demonstrated an understanding of the theoretical risks that climate change poses to their business, Ceres said.
“At best, most insurers view climate change as a risk that will inherently be captured in their Enterprise Risk Management strategies, and at worst as an environmental issue immaterial to their business,” Ceres said. P&C insurers are further along in implementing the tools to manage climate change risks compared to life and annuity, and health insurers, regardless of size; and just 23 companies, mainly large and foreign-owned, have a specific and comprehensive strategy to cope with climate change.
The aim of the survey and Ceres’ analysis of the responses is to provide regulators with substantive information about the risks to insurers posed by climate change, as well as steps insurers are taking in response to their understanding of climate change risks, Ceres said.
Insurers that write more than $300 million in direct written premiums in California, New York and the state of Washington are required to disclose their climate-related risks, which Ceres said encompasses most large insurers and therefore offers insights into how well the industry as a whole is prepared.
Ceres analyzed the responses based on four criteria, including:
1. How the companies manage climate change issues
2. What drivers shape their strategies
3. What actions they take in their core functions or operations
4. How they interact with external stakeholders.
Those domains then were subdivided into 37 indicators, Ceres said and scored using a proprietary methodology, intended to enable comparison between industry segments, company size and other attributes.
The Ceres Coalition is comprised of more than 130 institutional and socially responsible investors, environmental and social advocacy groups.
McMahon writes for Insurance Networking News, a SourceMedia publication.
