Calif. issues first ever stress test to evaluate climate risks to insurers

The first-in-the-nation stress test specifically assessed companies financial ties in fossil fuels. (Photo: rivalstrife/iStock)

In an unprecedented move, California has become the first state to conduct a climate-related financial risk stress test and analysis of insurance companies’ investments in fossil fuels. The test was issued by the California Department of Insurance (CDI) and Insurance Commissioner Dave Jones.

2° Investing Initiative, a global think tank on climate risk, conducted this analysis for insurers in California’s insurance market with over $100 million in annual premiums. The insurers analyzed in this test have over $500 billion in fossil fuel-related securities, $10.5 billion of which consists of investments in thermal coal enterprises.