Are insurers leading the fight against climate change?
The insurance industry has long focused on ESG priorities, but climate activists say insurers are doing more harm than good.
Environmental, social and governance (ESG) priorities may be new to some industries, but the insurance industry has long focused on understanding and addressing issues related to the warming climate, said Sean Kevelighan, CEO of the Insurance Information Institute (Triple-I), during a June 1st discussion with regulators.
“Environmental, social, and governance issues — ESG — are in the insurance industry’s DNA,” Kevelighan stated to the National Association of Insurance Commissioners’ (NAIC) Climate and Resiliency Task Force. He added that new investment decisions at global insurers and reinsurers will likely lead to carbon emission reductions.
Just in the past year, insurance businesses such as Lloyd’s of London, Swiss Re and Willis Towers Watson, to name a few, committed to cut net emissions in the coming decades. Several insurers also have ceased coverage for the fossil fuel industry, which has been linked to accelerating the climate crisis.
The industry’s commitment to reducing climate-related risks stems heavily from its experience with mounting losses tied to increasingly severe weather events.
“Insured losses caused by natural disasters have grown by nearly 700% since the 1980s, and four of the five costliest natural disasters in U.S. history have occurred over the past decade,” Kevelighan said.
According to Kevelighan, insured losses from natural disasters in the 1980s averaged $5 billion annually. In the 2010s, that figured jumped to $35 billion; last year, U.S. insurers paid out $67 billion due to natural catastrophes.
“The insurance industry’s focus on resilience is starting to pay dividends as more Americans recognize the very real risks their residences face from floods, hurricanes, and other natural disasters,” Kevelighan continued.
Climate activists, however, argue that global insurers’ ESG policies and practices lag behind other financial sectors.
Research conducted by ShareAction, a U.K.-based finance watchdog, on 70 insurers in 15 countries found that almost half (49%) of insurers surveyed have no board-level involvement in responsible investment and underwriting. Further, the study revealed that only 44% of insurers have a climate change policy for investments, 30% have a climate policy for underwriting, and just 13% have net-zero policies for investments.
Of the regions studied, U.S. insurers performed the poorest based on ShareAction’s assessment of climate-friendly initiatives.
“The U.S. insurance industry is burying its head in the sand as the rest of the world races to embrace a greener, cleaner and more equitable future,” said Felix Nagrawala, research manager at ShareAction, in a press release. “Despite the sector’s expertise in identifying, forecasting and managing risk, it continues to support companies responsible for climate change, including those engaged in coal, tar sands, and Arctic oil and gas.”
Related: