Insurers can no longer put off addressing the impact of climate change on their underwriting, pricing, and investment decisions, as well as their bottom lines, a recent analysis from Deloitte asserts.
“The escalating frequency and severity of extreme weather-related events – from wildfires in the U.S., to record heat waves in Europe, to floods in Japan – have shone a brighter regulatory spotlight on insurance risk and climate change,” states the analysis, How insurance companies can prepare for risk from climate change. “One federal regulator in the U.S. went so far as to suggest that the potential damage from climate change could end up being as severe as the fallout from the mortgage crisis triggering the 2008 financial crisis.”
The Deloitte analysis draws partly on the firm’s own Insurance Regulator State of Climate Risks Survey, which found:
- A majority of U.S. state insurance regulators expect all types of insurer’s climate change risks to increase over the medium to long term – including physical risks, liability risks, and transition risks.
- More than half of the regulators surveyed also indicated that climate change was likely to have a high impact or an extremely high impact on coverage availability and underwriting assumptions.
The analysis notes that many regulators either aren’t aware of how prepared carriers are to deal with this threat or they aren’t fully confident that carriers are prepared.
According to the survey:
- One-third of responding regulators said they didn’t know how well the insurers are prepared to deal with the potential impacts of climate-related risks on financial stability.
- Among those who were aware, only up to four respondents answered that insurers were largely or fully prepared.
- One-third of the regulators surveyed didn’t know whether current insurer risk models were up to the challenge of capturing and testing climate-related risks.
“Clearly, there’s room for insurers to better disclose and showcase the efficacy of any activities and actions they may be taking to assess and mitigate climate-related risks,” the analysis states. “This could help reassure regulators about insurers’ ability to withstand extreme weather events, defend underwriting and pricing decisions made in response, and possibly head off more onerous mandatory disclosures down the road.”
According to the analysis, regulators are likely to, at some point, begin requiring more of insurers in the way of disclosure, including stress tests of a range of plausible climate-change scenarios and a determination of how climate data is used in risk modeling for pricing and underwriting decisions.
“At the same time, more may be asked of insurers in terms of steps taken to prevent worsening climate-related losses, including adaptation activities to mitigate the impact of such risks,” the analysis states.
The International Energy Agency is facing renewed pressure from investors and scientists concerned about climate change to overhaul the agency’s projections for fossil fuel demand.
Pension funds, insurers and large companies were among 65 signatories of a joint letter to Faith Birol, head of the IEA, according to a Reuters article appearing this week in Carrier Management.
The letter urges Birol to do more to support the implementation of the 2015 Paris Agreement to avert catastrophic global warming.
“The year 2020 marks a turning point for the world — the year when we either grasp the challenges and opportunities before us, or continue delaying and obstructing the low-carbon transformation,” the letter states.
The letter represented the first coordinated response by investors, scientists and campaigners pushing Birol to rethink the organization’s annual World Energy Outlook, which helps shape expectations in financial markets over how quickly the world could transition from a fossil fuel-dominated energy system to cleaner sources of power.
The latest edition of the outlook was published on Nov. 13.
There’s been no shortage of pressure to get insurers away from fossil fuels on many fronts.
According to a tally by a climate activist group, over the past two years 17 insurers have restricted insurance services to coal projects, a dozen insurers have adopted policies to stop all direct insurance coverage to new coal projects – among them are Allianz, AXA, Generali, QBE, Zurich, SCOR and Swiss Re.
Climate and Thanksgiving
Looking for a way to start a conversation with a relative who doesn’t share your views on climate change?
Each year an increasing number of publications and groups seem to be posting advice on how to do just that – so be mindful of who you’re sitting next to when the turkey is being carved.
The New York Times this year put together 10 resources to refresh your understanding of our warming planet.
The article, which as is evident is geared toward climate change believers, includes resources like websites, fact sheets, podcasts, videos and short books.
For those who are uncomfortable with confrontation or think that only friendly topics are welcome around the table, there may be some good news.
Morning Consult, a technology and polling company, says Climate talk isn’t on the Thanksgiving menu for most people.
The group conducted a poll that shows only 9% say they plan to bring up climate change at Thanksgiving, while 48% said they have started a conversation about it with their friends or family in the past year.
“Most people don’t perceive a social norm in favor of taking climate action, and so I think that sort of feeds into this reluctance to talk about it,” Parrish Bergquist, a researcher at the Yale Program on Climate Change Communication, told Morning Consult. “This is a risky subject.”
Want to know who to steer clear of next week?
The poll, conducted Nov. 6 to Nov. 8 among a national sample of 2,187 people, shows 44% of those who start the climate change conversation are friends, while 27% are coworkers and 24% are parents.
If reading’s not your thing, a webinar, How to Talk About Climate Change at Thanksgiving Dinner, may do the trick.
Katharine Hayhoe, a senior advisor with Young Evangelicals for Climate Action, explores social science and psychological research and communications best practices in an attempt to “identify concrete strategies for having productive climate conversations with friends and family.”
A Government Accountability Office report says the Environmental Protection Agency should do more to protect the Superfund sites from wildfires, flooding and other disasters driven by climate change.
The Superfund program, used by the federal government to address sites with hazardous substances, was established by the Comprehensive Environmental Response, Compensation, and Liability Act of 1980.
The EPA is responsible for administering the program. The EPA coordinates the cleanup of Superfund sites by identifying sites that potentially require cleanup action and places eligible sites on its National Priorities List (NPL), which includes some of the nation’s most seriously contaminated sites.
The GAO report shows that nearly 1,000 Superfund sites in the U.S. are vulnerable to floods, storm surges, wildfires or sea level rise.
“Available federal data—from the Environmental Protection Agency (EPA), Federal Emergency Management Agency, National Oceanic and Atmospheric Administration, and U.S. Forest Service – on flooding, storm surge, wildfires, and sea level rise suggest that about 60% of all nonfederal National Priorities List (NPL) sites are located in areas that may be impacted by these potential climate change effects,” the report states.
The report notes that Hurricane Harvey in 2017 “dumped an unprecedented amount of rainfall” over the Houston area, damaging several Superfund sites containing hazardous substances.
At one site on the San Jacinto River in Texas, floodwater eroded part of a structure containing substances like including dioxins, which are highly toxic and can cause cancer and liver and nerve damage, the report notes.
“That same year, the Fourth National Climate Assessment (NCA) stated that many temperature and precipitation extremes have become more frequent, more intense, or longer in duration,” the report states. “The NCA reported that climate models are consistent with these trends continuing, which may make certain natural disasters more frequent or more intense. Further, the NCA reported that some climate change effects, including sea level rise and increased coastal flooding, could lead to the dispersal of pollutants, which could pose a risk to public health.”
- Are Employees Pushing Insurers to Shun Coal in Climate Change Movement?
- IBHS Chief Continues to Ask Congress to Embrace Tax Credits for Climate Resilience
- Regional Greenhouse Gas Initiative Grows by Another State
- Climate Change Tops List of World’s ‘Extreme Risks’
- Retreat as an Answer to Climate Change?
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