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April 03, 2009
Insurers Improve Response to Climate Change
    by Robert Kropp

Report from Ceres finds increased awareness of climate risks, and new products and offerings, but concludes that room for improvement remains.

The insurance industry has become an important messenger of climate risks. With the cost of natural disasters in 2008 reaching $181 billion in total economic losses and 236,000 deaths, insurers have increasingly acknowledged that climate change is a material risk to their business. A new report from Ceres finds that many new product offerings launched by insurers in 2008 could reduce greenhouse gas (GHG) emissions in many energy intensive industry sectors.

The report, entitled From Risk to Opportunity: Insurer Responses to Climate Change, compares its results to a similar report published by Ceres in November 2007. It identifies 643 products and services offered by 243 companies in 29 countries that are designed to help consumers and businesses manage their exposure to climate risks. The 100-page report details an increase in coverage for green buildings, renewable energy, carbon capture and storage, and carbon trading. The report also documents $11 billion in investments by 15 insurers in businesses that are developing and offering low- and no-carbon technologies.

However, the report also finds that considerable room for improvement still exists within the property insurance segment of the industry, while life-health companies lag far behind in addressing the impact of climate change on their customers. While European and US-based insurers display a growing initiative when it comes to addressing climate change, few new initiatives are originating in Asia at present. And while investment in green initiatives is growing, the amount still represents only a tiny fraction of the industry’s total investments of $16.6 trillion in 2005.

Additionally, voluntary disclosure to shareowners by means of the Carbon Disclosure Project (CDP) has leveled off, as has disclosure through securities filings or corporate reporting.

The report notes growth in each of the ten areas of insurer climate activities since 2007, with climate science and analysis, crafting innovative products, and carbon risk-management and offsets showing the most improvement. Lower rates of growth are found in the areas of loss prevention and direct investment in climate-friendly industries.

The report concludes that while the current economic crisis might curb innovations in some activities of the insurance sector, the outlook for 2009 remains strong. Going forward, challenges and opportunities for the sector include new products and services, the identification of coverage gaps, and confirmation of the performance benefits of green improvements.


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