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Insurance CEOs Call on Industry to Get Proactive About Climate Change

By Stacy Morford

Jul 8, 2009

“Under these circumstances, the insurance industry needs to recognize climate change as threat which will severely influence the entire socio-economy of the world.”

A Reactive Industry Gets Proactive

As the Ceres report showed, the industry has been evolving, led by European experience with stricter climate laws and regulations.

Early pressure in Europe for the Kyoto Protocol came from Swiss Re and Munich Re, reinsurance companies that recognized how climate could jeopardize their risk assessments. Their research in the late 1990s began framing climate change as a business risk.

Insurers in Asia and Australia have followed their lead. And in the UK, 40 of the largest insurers have committed to the principles: lead in risk analysis, inform public policy making, support climate awareness among consumers, incorporate climate change in investment strategies, and report and be accountable.

The U.S. has lagged on policy engagement, but it is advancing when it comes to insurance product innovation, said Andrew Logan, director of oil and insurance programs at Ceres.

"Where there's an obvious way to make money, we're seeing a lot of action in the U.S. Whereas, longer term, we’re not seeing as much," he said.

But the industry is coming around to more active involvement in climate issues. One driving force is the National Association of Insurance Commissioners, which in March to begin requiring insurers to report every year on how their businesses are impacted by climate change and what they were doing to manage the risks. Logan expects to see involvement in climate issues ramp up in the coming year.

The Geneva Association CEOs also expect insurers worldwide to make the shift from being reactive to proactive over the next year as the industry redefines its role, with more emphasis on sharing its risk assessment expertise, developing risk management tools such as hazard maps, creating insurance products and services that shift clients toward less climate-damaging practices, and increasing their emphasis on educating clients and communities about steps they can take to mitigate risks.

Insurers already need to understand geology, meteorology and building codes to properly assess risk. By educating the public, policymakers and corporations through ad campaigns, shareholder advocacy, environmental performance reviews and sharing information, they reduce their own risk, while also positioning themselves to influence local planning processes so what gets built is fit to be insured.

“People will generally not accept the same lax attitude toward risk management by governments if they are fully aware of the consequences,” the CEOs note.

For the insurers themselves, while the potential for expensive losses is immense, climate change also creates new opportunities for underwriting and sustainable investments that serve both the insurers' and the planet's best interests, the association writes.

For example, they can encourage energy efficiency and cleantech developments by insuring new technologies, which helps startups secure bank loans and speeds their transfer to the market. Swiss Re, for one, helped to establish the to invest in energy efficiency and renewable energy projects. Realistically, however, generating a high level of investment in these areas may require governments setting a price on carbon — the investment goal is still to make money.

For poor countries, insurers talk about about microinsurance embedded in microfinancing. In Malawi, for example, farmers can buy index-based drought insurances linked to loans that improve the farmer’s credit worthiness. Globally, about 7 million policy holders are covered by microinsurance, primarily in South America, Africa and Asia, according to CERES. Several Caribbean island nations recently formed the world’s first multi-country and index-based catastrophe insurance pool, the Caribbean Catastrophe Risk Insurance Facility, primarily to help with hurricane damage.


I really want to see what insurance companies will do in the health department after the Obama law will pass.

Although insurance CEOs are

Although insurance CEOs are more concerned about climate change than CEOs in other sectors, they are less likely to be preparing for climate-change initiatives in the coming twelve months. This split vision may stem from the fact that most insurers believe climate change is not particularly relevant to their internal business models, although it has huge potential consequences for non-life companies, because it increases the risk of natural disasters. Re-insurers and property casualty firms have taken a leading role in lobbying for co-ordinated remedies and must stick to their task. Anyway thanks a lot for the useful information and for the ability to express my own opinion. Regards, Peter Dickson from

At first I didn't understand

At first I didn't understand what do insurance industry has to do with the climate change... Now I understand that an active implication from insurers can make the difference. For sure the auto industry will be among the first industry affected by the insurance changes.

I am glad to see this...

There is little doubt that Global Warming is happening. With that will be disease and deteriorated health The cause and effect will be more insurance claims that will drive insurance prices to through the roof. Thanks for sharing, this was the most interesting read of the day.

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