Report: Insurance firms vulnerable to escalating climate risk
A vast majority of the world's major insurance companies are ill-prepared to deal with the increasing risks of climate change, despite facing massive pay-outs if floods, droughts and other extreme weather conditions continue.
That’s according to new research from sustainability lobby group Ceres, which discovered that only nine of 330 global insurance firms (3%) – including Zurich, Munich Re, Swiss Re, and Allianz – have established a strong internal plan to deal with looming climate risks,
The report cites numerous studies of how rising global temperatures are driving sea level increases and extreme weather systems. Insured losses from the UK floods alone totalled more than £1bn. Likewise, the UK heatwave of 2013 killed approximately 760 people in nine days, affecting the Life & Annuity insurance sector.
“Despite being on the ‘front line’ of climate risks, most of the company responses show a profound lack of preparedness in addressing climate-related risks and opportunities,” said Ceres president Mindy Lubber.
She did however point out that a small number of the most exposed companies in property & casualty insurance were showing positive leadership for the rest of the industry.
The companies were ranked into four tiers, based on a half-dozen climate related indicators, including governance, risk management, investment strategies, greenhouse gas management and public engagement (such as their climate policy positions.)
And 87% of the firms were graded as ‘Beginning’ or ‘Minimal’, with health insurers and life and annuity groups receiving some of the lowest rankings.
Tony Kuczinksi, president of one of the top-ranked companies Munich Re America, said that insurance firms could turn climate change into an opportunity by ‘taking a leadership role in addressing climate change by delivering solutions that not only transfer risk but incentivise its reduction’.
The report itself laid out a number of recommendations for the insurance industry, including integrating climate change into enterprise risk management frameworks and issuing comprehensive, public climate policies that articulate the firm’s understanding of climate science.
Last week a European Environmental Agency report found that European Governments were equally ill-prepared for looming climate-change risks
The full Ceres report can be found here.
© Faversham House Ltd 2023 edie news articles may be copied or forwarded for individual use only. No other reproduction or distribution is permitted without prior written consent.