The U.S. property/casualty insurance industry, which has been facing rising claims bills for extreme weather events, mostly reacted with silence to President Donald Trump’s decision to withdraw the country from the Paris climate change accord.
The American Insurance Association (AIA), Reinsurance Association of America (RAA) and Insurance Information Institute (III), the major communications organization for the industry, declined to comment.
The Property Casualty Insurers of America Association (PCI) issued a statement by Dave Snyder, vice president for international policy, that did not mention the actual Paris agreement or the U.S. withdrawal: “Insurers are experiencing increasing losses due to extreme weather events. Considering this, it is particularly important for societies, individuals and communities to focus on reducing their risk of loss from such events through adaptation and mitigation.”
But on Twitter, Anthony Kuczinski, president and CEO of Munich Reinsurance America, called the Paris agreement a “very important step in mitigating global warming and its risks” and labeled the withdrawal by the U.S. a “serious blow” to mitigating global warming.
Swiss Re, one of several companies like Munich Re that has been out in front in efforts to combat climate change, said that more than 20 studies it has done since 2009 across the globe have found that annualized losses from 1 percent to 12 percent of gross domestic product (GDP) result from climate risks. “Swiss Re very much regrets President Trump’s decision to withdraw from the historic Paris climate accord,” the insurer’s social media post said. It called the Paris agreement a “key enabler to adopt pre-emptive actions” to combat climate change.
‘We Are Still In’
According to Ceres, a business and public interest group advocating for sustainability and action against climate change, The Hartford, Munich Re America, Swiss Re and Allianz have in the past publicly expressed support for the Paris agreement. Ceres also noted that Allianz and The Hartford are among the more than 1,000 executives and firms signing a new “We Are Still In” initiative pledging to meet the goals of the Paris agreement.
“Over 1,100 businesses, as well as nearly 300 institutional investors with over $17 trillion in assets, urged President Trump to keep America in the Paris Agreement,” Ceres said. “In the wake of the deeply unfortunate announcement of a withdrawal from that agreement, Ceres expects to see corporate and investor demands for — and commitments to — climate action to only grow stronger.”
The National Association of Insurance Commissioners (NAIC), representing state insurance regulators, declined to comment. However, several insurance regulators reacted individually. California Insurance Commissioner Dave Jones called Trump’s decision “one of the worst abdications of United States leadership” and vowed to continue to require insurers in his state to disclose publicly their investments in oil, gas and coal and encourage them to divest from thermal coal.
Washington Insurance Commissioner Mike Kreidler criticized the pullout as “short-sighted” and vowed to continue to require insurers that do business in Washington to report their climate risk annually. “Trump’s efforts to undermine our environment carry a steep price that will be paid for generations to come,” Kreidler warned.
Talking Climate Change
Despite the politics, insurance and reinsurance carriers and executives have addressed climate change over the years, including in 2014 when 66 insurance executives signed The Geneva Association’s statement of principles acknowledging the role insurance can play to tackle climate-related risks. Those signing included CEOs of U.S.-based carriers AIG, Berkshire Hathaway and ACE (now Chubb), as well as leaders of foreign insurance companies.
Frank Nutter, president of RAA, has stressed the need for the industry to follow climate change science, even as it attempts to avoid the divisive politics in the U.S. He noted that European reinsurers like Munich Re, Swiss Re, Zurich and Allianz have been outspoken about their views.
“There is a clear divide between what largely are European-based companies and the U.S. companies in how they perceive climate change,” he said.
A commercial lines claims expert for Nationwide Insurance said the company has experienced a 26 percent increase in average severity over the three-year period of 2014 to 2016, compared with the seven-year period between 2007 and 2013. It has also recorded a 14 percent increase in unique commercial catastrophe events when comparing those same time periods.
When asked whether this was climate change at work, the executive said, “I don’t know that I’m in a position to comment on that, but certainly there’s no question that the winters that we’ve seen in the Midwest and east of the Mississippi are much warmer than we have seen in many years. Anytime we see that type of warm weather, especially the Midwest and East, it’s going to make for some very disruptive weather patterns, which are very difficult to forecast.”
Even if many aren’t talking about Paris, more insurers are disclosing their climate risks. A 2016 report by Ceres credited Allianz, Swiss Re, Erie, Nationwide, The Hartford and Munich Re as carriers with climate risk management best practices.
The report, “Insurer Climate Risk Disclosure Survey Report and Scorecard,” evaluated the quality of responses from insurance companies in the annual National Association of Insurance Commissioners Climate Risk Disclosure Survey. Twenty-two of the insurers studied — including 13 based in the U.S. — earned a “high quality” rating. The results showed marked improvement from responses analyzed in a report issued two years ago, according to Max Messervy, one of the authors of the report and the insurance program manager at Ceres.
Some analysts have viewed the Paris agreement as opening up opportunities for insurers to develop new products and to work with governments in developing countries on new insurance programs.
“This opens up an unprecedented opportunity for the industry to start a very positive, open dialogue with the government toward development of sound, scalable and sustainable insurance programs, as part of which a significant amount of innovation can happen,” said Mayram Golnaraghi, a climate risk expert with the think tank The Geneva Association.
Golnaraghi said by 2020, the reinsurance sector will not only be providing a wider range of risk-transfer solutions, but also will be supporting emission reduction efforts and transitioning to a low-carbon economy through its investment strategies and actively managing its carbon footprint.
But in speaking on climate change, President Trump cited Heritage Foundation research on the Paris agreement, including the claim that compliance could “ultimately shrink America’s GDP by $2.5 trillion over a 10 year period.”
The Heritage Foundation claims the Paris climate accord would cost as many as 400,000 jobs, reduce family income by $20,000 and raise household electricity costs by up to 20 percent — without delivering any practical environmental benefit.
Meanwhile, the Wall Street Journal applauded Trump’s move in an editorial, calling the Paris accord “a pledge of phony progress.”