Climate Change Endangers Insurance Industry: Ceres

The survey showed that larger companies, generally in property and reinsurance, are studying climate risk and working to accommodate it in their underwriting and capital decisions. However, the smaller companies that make up a big portion of the industry are not as concerned. Those smaller companies also are the ones to which consumers are most exposed and therefore present those consumers with the greatest risks.

While most are focused on hurricanes and coastal risks, few are looking at the way climate shifts might increase the number of violent inland storms, tornadoes, heat waves, snowstorms and flooding.

California Insurance Commissioner Dave Jones, who co-chairs the NAIC’s climate change task force, said in a statement, “Climate change is an obvious physical threat to us all, but increasingly it also poses a serious financial threat to the insurance industry, with the very real potential of negatively impacting consumers’ ability to purchase affordable insurance. This survey is a solid first step toward evaluating how prepared the insurance industry is to confront the impacts of climate change.”

Jack Ehnes, chief executive officer of CalPERS, said the lack of disclosure the report documents “means that investors—and regulators—have been flying blind, without a solid sense for whether the industry is taking the steps necessary to understand and respond to this profound risk. Our fear is that climate change poses a fundamental threat to the long-term availability and affordability of insurance.”

Ehnes, who is also a former Colorado insurance commissioner, added, “This has tremendous implications for the economy and that is why we, as investors, are focusing so acutely on this sector.”