NU Online News Service, Sept. 2, 11:33 a.m.EDT

Despite a broad consensus among insurers that climate changewill have an impact on extreme weather events, few companies canoutline their plan to manage the associated risks andopportunities, according to a report on a National Association ofInsurance Commissioners’ (NAIC) survey.

Large global insurers are more likely to respond to climatechange because of their internal resources than are smallerinsurers, which rely on external models and outside expertise,according to the report.

The report, titled “Climate Risk Disclosure by Insurers:Evaluating Insurer Responses to the NAIC Climate Disclosure Study,”was released by Ceres, a non-profit organization that leads anational coalition of investors, environmental organizations andother public interest groups working with companies to addresssustainability challenges such as global climate change and waterscarcity.

The study was based on climate-risk disclosures byinsurers for the NAIC.

In early 2009, the NAIC appeared on track to approve a mandatoryclimate-risk disclosure standard for insurers.

While the standard was later weakened, some key states withsignificant market share--California, New York, New Jersey, Oregon,Washington and Pennsylvania--moved forward with it.

With some exceptions, the survey finds that while many insurersbelieve climate change is a coastal problem, aggregated losses arebeing driven by smaller, non-modeled events, including floods,droughts, snowstorms, hailstorms and tornadoes.

The findings of the report are “illuminating anddisillusioning,” Mindy Lubber, Ceres president and director,Investor Network on Climate Risk, writes in the report’sforward.

Lubber adds that while the survey reveals “a broad consensusamong insurers that climate change will have an effect on extremeweather events, only 11 of the 88 companies reported having formalclimate-risk-management policies in place, and more than 60 percentof the respondents reported having no dedicated management approachfor assessing climate risk.”

Sharlene Leurig, author of the report, says ina conference call that while insurers are some of the world’slargest investors, controlling $23 trillion in assets, they arealso “uniquely vulnerable to the affects of climate change, frommore extreme weather to shifting disease factors.”

She adds that, “given the industry’s role as a messenger ofrisk, insurers also have a unique ability to help other economicactors identify their risks and manage them to prevent loss.”

She observes that while a number of insurers have for about adecade warned their competitors and clients about “the urgent needfor insurers to adapt their business models to prevent unmanageablelosses to the industry, very few have publicly disclosed theirplans for making their business, their clients and shareholdersless vulnerable to climate change.”

After Hurricane Katrina, she notes, several quiet hurricaneseasons have made it “easy for insurers, regulators andshareholders to turn their attention to other pressing issues,”such as the global economic depression.

But 2011, she says, is a “painful and important reminder that achanging climate will inflict damage across the U.S.”

In the U.S., she says, the reminder is that climate change willnot just be a coastal problem, as some insurers believe. The majorlosses insurers and communities have experience this year “arelargely from inland storms.”

She adds, “Unfortunately, science is telling us that more yearsare likely to look like 2011. But still, too many insurers aremodeling using historical weather data that’s increasinglyirrelevant to a changing climate.”

The resulting damage to communities and shareholders, she says,suggests that insurers’ “existing efforts to understand changingextremes, to price them appropriately, and to work with customersand regulators and policymakers to manage risks so insurance cancontinue to do its job have not been enough.”

She cites the study, noting that more than 60 percent ofrespondents have “no dedicated management approach for assessingclimate risk.”

While more than half of insurers discussed potential financialrisks from climate change, she says, “only 18 percent outlined theway their company is adapting capital allocation or pricing tomanage those risks.”

While a handful of insurers are addressing the risks, she adds,the vast majority of insurers in the U.S. are operating as if it’s“business as usual.”

Ceres says it would like to see annual mandatory disclosures andhave insurer responses publicly available.