Most insurance companies have yet to adopt formal policies for how to deal with risks from growing climate changes, according to a new report issued Sept. 1 by Ceres, a national coalition of investors, environmental organizations and other public interest groups.
Most insurers agree climate change will affect extreme weather events, but of 88 leading U.S. insurers, only 11 have developed strategies to address the risks.
The report also found the insurance industry is focusing mostly on impacts from hurricanes on coastal areas and is ignoring other risks, such as wildfires, floods, prolonged droughts and growing financial exposure in the health and life insurance segments from longer, more frequent heat waves and expansion of disease vectors like mosquitoes and ticks. The authors say most insurers that report using catastrophe models appear not to have a clear understanding of the limitations and uses of the models for anticipating changes in risk.
The report analyzes responses from insurers to the National Association of Insurance Commissioners 2010 "Climate Disclosure Survey." Some states required responses, while others made participation voluntary or did not make the disclosures public.
Insurers filed public disclosures about how they're dealing with climate change with insurance regulators in New York, New Jersey, California, Oregon, Pennsylvania and Washington.
Few insurance companies provided meaningful information about the potential financial impact of losses from more volatile weather, the report concluded.
"Our fear is that climate change poses a fundamental threat to the long-term availability and affordability of insurance," Jack Ehnes, chief executive officer of the California State Teachers' Retirement System, said in a Ceres press release. "This has tremendous implications for the economy and that is why we, as investors, are focusing so acutely on this sector."
The California State Teachers' Retirement System is one of America's largest pension funds. Ehnes is also a former Colorado insurance commissioner.
The Ceres report recommended requiring insurers in every state to publicly disclose how they're addressing risks from climate change and to create more shared resources to help the industry analyze and respond to climate trends.