Last year's $32 billion in catastrophe losses made 2011 one of the worst on record for insurers, coming in second only to 2005, the year in which Hurricane Katrina struck. Combined with a sluggish economy, low investment yields and an unpromising outlook on future weather events, this is a particularly bad time for the insurance industry to experience continued erosion of capital, the report says.

In a conference call to discuss the report, authors Cynthia McHale, Ceres's insurance program director, and Sharlene Leurig, called climate change “economic ground zero in the industry's exposure to weather events, environmental liability lawsuits and investment risks.”

They note that when insurers experience mounting losses that force them to leave markets, their loss experience trickles down to taxpayers who fund state pools to insure property in areas abandoned by the private market.

Hurricane-riddled Florida exemplifies what happens in a property insurance vacuum. There, Citizens Property Insurance Corp., the government-backed insurer of last resort, is the state's largest property guarantor.

Florida is also home to two of the five U.S. metro areas that are most exposed to property damage from fears of growing tropical cyclone activity caused by climate change.

During the call, Kreidler says, “As an insurance commissioner, I care deeply about making sure that insurance companies are able to fulfill their promises and remain affordable and available. The last thing I want to see are insurers pulling out of markets because of catastrophe events.”

He continued, “It is not unusual for insurance companies to withdraw from markets after a major hurricane or earthquake. However, the problem is that when you start to see long-term hurricane or hailstorm patterns, companies start looking at rate increases or seeking to withdraw from markets.”

New York, California and Washington are requiring insurers operating in those states to submit responses to the National Association of Insurance Commissioner survey on climate change impacts and mitigation strategies.

Instead of politicizing or avoiding the issue, say those involved with the report, insurance regulators and executives need to create granular models that align with current weather patterns and enact stricter, sturdier building codes.

Jack Ehnes, chief executive officer of the California State Teacher's Retirement System said during the call, “As investors, we look to a company's exposure to climate change as part of our [investment] analysis. Insurers like Swiss Re and Munich Re have been warning about this for some time, but the industry's overall response is still short of what we need.”

Ehnes, along McHale and Leurig, cited several companies and organizations, such as Travelers, the Institute for Business and Home Safety, Habitat for Humanity and Swiss Re, that have been taking steps to turn the charged topic into a point of action.

The report says that the entire insurance industry will need to make the effort to take the necessary steps to protect this vital industry by:

• Pricing risk exposure of exposed property in the context of emerging extreme weather patterns.

• Undertaking research on regional forecasting of catastrophe patterns.

• Developing reliable forecasts for non-modeled events like thunderstorms and wildfires.

• Informing land use and infrastructure design to assure the insurability of highly-exposed markets.

• Promoting reduction of carbon emission to soften its future blow to the climate.