Ceres Report: P&C Industry Mostly Not Addressing Climate Change Risk

Only A small number of P&C insurers are altering their business models to accommodate for the effects of climate change, according to Ceres' “Insurer Climate Risk Disclosure Survey Report & Scorecard: 2014 Findings & Recommendations,” which ranks the 330 largest insurance companies on what they are saying and doing to respond to escalating climate risks.

Just 4% of the 193 P&C insurers surveyed by Ceres received an overall “leading” rating, and 20% received a “developing” rating, showing that the majority of P&C insurers are not actively managing climate change's associated risks. Only 13 insurers had a climate review expert on staff to monitor climate risks and strategies, according to Ceres.

The non-profit advocacy organization offered the following actions for those companies looking to become more proactive in managing these risks:

Develop Oversight at the Senior Level.

In order to address the long-term risks involved with climate change, senior board and C-suite execs must understand the problems they face. Company policies should align with the risks that climate change poses to their businesses, in order to react appropriately in the event of a catastrophe.

Inform Your Stakeholders of Your Position.

Because P&C insurers absorb most of the financial impacts from climate change, your company should have a public and comprehensive corporate policy on climate risk management available to shareholders, policyholders and employees.

Policies should outline the company's understanding and position on climate science, greenhouse gas reduction goals, commitments to fighting climate change, and how much climate change plays a part in underwriting management and company goals.

Improve Foresight on Climate Risks.

Catastrophe modeling has been one of the primary risk management tools for P&C insurers, but large-scale climate projection software and underwriting data can also help pricing and assist insurers in creating loss data.

Engage With Your Stakeholders.

Communicate with your policyholders and shareholders on increasing their resilience against climate change. Advocate for investment in public infrastructure, educate your policyholders and promote “climate-smart” products.

Disclose Everything.

Being transparent is one of the keys to earning trust from the public and your stakeholders. Disclose your practices to regulators and use it to see how your company's management stacks up against others.