US insurers wake up to climate change

The insurance companies of Old Europe have for some time been warning that premiums will rise to cope with the financial burden of ever-increasing extreme weather events.

The Association of British Insurers announced in June that it expected weather-related costs in Europe to rise by as much as US$150 billion every year, while the UK could see costs of US$40 billion a year from flooding alone (see related story).

Meanwhile Germany’s financial services group Allianz has gone as far as teaming up with conservation charity WWF to lobby governments to take immediate action on tackling climate change by reducing carbon emissions (see related story).

But US-based financial institutions have, on the whole, adopted the head-in-the-sand approach popularised by the Bush administration.

According to a new report by CSR consultants Innovest Strategic Value Advisors, however, this looks set to change.

The report acknowledges that American insurers lag behind their European colleagues in taking social and environmental concerns into account, and on climate change in particular.

Most do not see it as their responsibility to take action on climate change and have tended to gear operations towards mitigating losses from disasters rather than looking at how changing weather patterns are likely to affect their clients and investors in the long term.

But, says Innovest, the industry is now making some headway and is now getting involved in efforts to understand and quantify the risks, both fiscal and environmental, facing the changing planet.

The one thing holding them back is the political will to address the issue – while most European leaders seem to at least be making the right noises, Washington has remained silent when it comes to supporting industry efforts to tackle climate change.

And though many major insurers are beginning to take climate change into account when drawing up strategic plans, says Innovest, clearer incentives and leadership on a federal level will be needed for them to do more than that.

By Sam Bond