On March 20, 2013, the German Insurance Association, with 474 members including Munich Re, Swiss Re, and Allianz, issued a position paper requesting that government regulators allow them to use a larger percentage of renewal energy resources for investment in their own portfolios. To facilitate the process, they want regulators to reclassify renewable energy into a lower risk category.1
This is groundbreaking news. The German insurance industry is making sure that as the fundamental risk managers for the German economy, they are leading the way for dealing with climate-related risk. And as providers of global insurance-based forms of risk transfer, Munich Re and Swiss Re are leading the way in reducing reliance on fossil fuels and nuclear power. As Swiss Re put it in a new report, “Sustainable energy is key to our livelihoods and future.”2
How are U.S. insurance companies preparing for climate-related risk? Let’s just say they could do better.
In 2012, the U.S. National Association of Insurance Commissioners (NAIC) required insurers in California, New York, and Washington State that write in excess of $300 million in direct written premiums to disclose their climate-related risks. Because most large insurance companies do business in at least one of these states, the survey provides a snapshot of how the industry is dealing with climate change.
CERES, a nonprofit organization advocating for sustainability leadership, analyzed the survey and summarized the findings in a report clearly showing that the insurance industry as a whole is woefully unprepared to deal with climate-related risk.
Of the 184 insurance companies required to respond to the NAIC survey, only 23 have developed comprehensive climate change strategies. And out of these 23 companies, 13 are foreign owned.3
What are the other 161 companies doing? In Part 2 I’ll discuss the response of most insurance companies and why this could be a serious problem for investors.
You should consider the investment objectives, risks, charges, and expenses of an investment carefully before investing.
1 “German Insurers Demand easing of Renewable Investing Regulation,” Responsible Investor, March 21, 2013. http://www.responsible-investor.com/home/article/german_insurers_ren_reg.
2 “WEF 2013: Powering a Clean Energy Future” February 2013, http://www.swissre.com/corporate_solutions/WEF_2013_powering_a_clean_energy_future.html.
3 “Insurer Climate Risk Disclosure Survey: 2012 Findings and Recommendations,” Sharlene Leurig and Dr. Andrew Dlugolecki, CERES.