Scorecard on Climate
A new report helps
insurers — and
on climate change
By Katie Siegel
Some insurance carriers get high marks for their engagement on the topic of climate change.
Each year, the National Association of Insurance Commissioners (NAIC) administers a Climate Risk Disclosure Survey. This eight-item questionnaire assesses an insurer’s approach to, and preparedness for, climate change. The survey questions cover investment decisions, risk mitigation efforts, financial solvency,
emissions and carbon footprint, and how insurers engage consumers on the issue.
The nonprofit organization Ceres, which advocates for sustainability leadership,
evaluates the survey to identify trends and track improvement over time.
“We systematically look at these responses and see from an industrywide
perspective who is doing what,” said Max Messervy, a co-author of Ceres’ most
recent report, “Insurer Climate Risk Disclosure Survey Report & Scorecard: 2016
Findings and Recommendations.”
“The top core theme we give the most weight to in our analysis is climate risk
governance; are senior managers and corporate directors engaged on the issue?
Are they being regularly briefed?” Messervy said.
According to the Ceres report, 25 percent of property/casualty insurers earned
a “high quality” rating, meaning they regularly involve their boards of directors in
discussions of climate change and sustainability goals.
“Through numerous studies and our work, it’s been shown to be a good practice to
have senior management leadership, from the CEO level on down, regularly engaging
in these issues as they emerge and evaluating economic impact,” Messervy said.
The Hartford, one “high quality” insurer on climate change, created an
environment committee to oversee the company’s sustainability strategy. The
Hartford’s CEO also joined White House roundtables on climate resilience.
“The Hartford is recognized regularly for our commitment to corporate
sustainability,” said Diane Cantello, vice president of corporate sustainability.
“Between 2007 and last year, the company’s energy-related greenhouse gases were
reduced by 57 percent.”
Another trait shared by “high quality” insurers — those who received at least
75 points from Ceres on a 100-point scale — is their collaboration with the
scientific community. Getting the most up-to-date information on climate change
both from leading scientists and through internal research is key to understanding
the exposure an insurer faces and providing guidance to clients.
Swiss Re, for example, conducts climate change research and works with
governments and international bodies to facilitate discussions.
“We have developed methodologies to assess and quantify climate risk for
certain regions or certain clients,” said Andreas Spiegel, head group sustainability
risk at Swiss Re. “We’ve provided studies to governments across the globe,
helping them to understand the future impact of climate change and develop an
adaptation strategy, which includes insurance components,” Spiegel said.
FM Global, another high-scoring carrier, depends on its in-house engineering
staff to evaluate the environmental impact of a variety of risks.
“We have to make sure we give our insureds sound guidance on how they can
meet sustainability goals, which means advising them on how their risks can make
them less sustainable, but also how their sustainability efforts present new risks,”
said Lou Gritzo, vice president and manager of research at FM Global.
Gritzo said a key challenge for insurers going forward will be keeping up with
advancing science and relaying it in easily digestible ways to their clients.
NEW BUSINESS POTENTIAL
Adapting to climate change also means taking advantage of new business
opportunities in renewable energy. Investment portfolios should be reviewed
regularly by company leaders. Fossil fuel producers, for example, may see
performance decline as renewable energy producers move into the market. New
regulations to curb carbon dioxide emissions could reduce demand for fossil fuels.
“We’re undergoing a massive energy transition currently, based on the Paris
climate agreement signed in December 2015, and basically the economics of
renewable energy are becoming
increasingly favorable over fossil fuel-based energy,” Messervy said.
“There is a need to understand both
the risk and the business opportunity
in renewable energy. It’s a core interest
for the insurance sector, especially
reinsurance because macro risks are
where we specialize,” said Spiegel. &
KATIE SIEGEL is a staff writer at Risk &
Insurance®. She can be reached at ksiegel@
• The NAIC assesses insurers’
climate change preparedness each
• 25 percent of insurers are rated
“high quality” by nonprofit Ceres.
• Insurers must collaborate
with the scientific community to