NU Online News Service, April 26, 3:38 p.m. EST
BOSTON–Risk managers considering climate change exposures are concerned about political and regulatory environments and confused about whose job it is to manage such perils, a survey has found.
The poll, released here yesterday by Switzerland-based commercial insurer Zurich Financial Services, and environmental sustainability network Ceres, revealed how 200 risk managers view climate change and its potential impact on their industries.
It was administered jointly with the Professional Risk Managers International Association (PRMIA).
Survey findings were announced at the 2010 Risk & Insurance Management Society (RIMS) Conference and Expo and are detailed in the report, “Climate Change Risk Perception and Management: A Survey of Risk Managers.”
Ceres President Mindy Lubber said climate change is “sending ripples across business sectors,” in terms of litigation, reputation risk and other issues.
“We cannot lose sight,” of the risks of climate change, she said, noting that most scientists agree that climate change is a reality and that human behavior is driving it.
She said governments are beginning to respond by mandating greenhouse gas reduction and other measures. Insurers, who stand to be impacted, she pointed out, are addressing the issue with modeling studies and products to cover risks.
“Risk managers at companies play a crucial role in helping businesses understand how their risk exposure may be changing,” Ms. Lubber said. “They can also help insurers create products and services that address those needs. So this survey is a perfect example of how insurers can play an active role in helping companies, all across the economy, understand and manage this fast-evolving climate issue.”
According to the survey, Risk managers are aware of climate risk and 30 percent of those surveyed said climate change regulation was one of the top five risks facing their company. However, the survey found that strategies regarding how best to mitigate climate risks are uneven.
“It’s clear that risk managers are conscious of risks posed to ‘business as usual’ by climate change,” said Lindene Patton, chief climate product office for Zurich Financial Services. “Now it is time to convert that knowledge to risk management action.”
She said Zurich is redoubling its efforts “to make certain risk managers understand the potential impacts to their businesses and working to offer solutions for mitigation of risks associated with climate change.”
The top concerns of risk managers, the survey found were:
o Political and regulatory environment
o Regulatory liability
o Fuel and power liability and price
o Natural disaster
o Employee recruitment and retention
o IT systems and security.
The survey captured opinions of risk managers from: financial services, insurance services, high-emitting industries, health, medical, government agencies, agricultural, and food/beverage. Nearly 60 percent of the survey respondents represented financial or insurance services or high-emitting industries.
When asked who in their company was assigned the “risks and opportunities associated with climate change,” 25.9 percent said no one was assigned, 24.1 percent said senior management, 16.5 percent said the risk management division and 16.5 percent were unsure.
Sohayla Fitzpatrick, steering committee member of the Boston chapter of PRMIA, a global organization which counts 67,000 members in 198 countries, said the survey is a first step in helping risk managers, capital providers, and insurers to better understand climate risk perception and what role internal risk management and external risk transfer can play in mitigating such risks.
She told NU Online News Service that risk managers unsure of who in their organization is responsible for managing the risks will gain more clarity with stepped up regulatory involvement. So far, she noted, regulations have been obscure.
o The majority of corporate risk managers are aware of and concerned about at least some aspect of climate risk.
o Regulatory risk and its potential costs are of highest concern.
o Concern about nearer-term physical risks of climate change is stronger than anticipated.
o Climate risk management strategies are uneven.
o Climate risk is managed at senior levels in some companies, and by no one in others.
o Climate risk management products and services are unclear.
o Risk managers are not sure whether liability coverage is adequate within existing insurance products – or may be unsure what exact liabilities will be realized as a result of climate change.
o Insurance products and risk consultation services may not be adequate, and more communication between insurers, risk advisors and risk managers are needed to understand where extensions may be necessary.
Based on the survey findings, the analysis recommends risk managers take the following steps to understand what these evolving risks mean for their business:
o Tap into emerging expertise on evolving climate risks to understand
their possible exposure.
o Communicate to all critical decision makers their organization’s
potential exposure to climate risk.
o Consider whether the management structures and performance metrics in
their organization are adequate for managing emerging climate risks.