Insurers urged to assess climate change risks
- Insurers urged to assess climate change risks
By JOHN CHRISTOFFERSEN
AP Business Writer
December 1, 2005, 8:36 PM EST
STAMFORD, Conn. -- State treasurers and controllers from around the
country urged major insurance companies Thursday to analyze and
disclose their financial risk from climate change, warning that
higher rates and loss of coverage are inevitable.
The officials, who oversee more than $800 billion in investments in
the companies, said they are worried about escalating losses from
hurricanes and other extreme weather. They say few insurers have
examined the risks they face from climate change.
"U.S. insurers are facing a perfect storm of rising weather losses,
rising global temperatures and more Americans than ever living in
harm's way," said Mindy S. Lubber, president of Ceres, a coalition of
institutional investors and environmentalists. "Insurers and
regulators have failed to adequately plan for these escalating
weather events that will have major long-term ramifications on
insurance companies and their shareholders."
But Robert Hartwig, chief economist of the Insurance Information
Institute, said such an analysis is not necessary. He said any change
in climate is gradual and insurers already take into account such
changes when they analyze risks.
"Insurers are probably more experienced than almost any industry at
adjusting to local changes in climate, whether they occur gradually
or quickly," Hartwig said. "No insurance regulator in the United
States is going to allow an insurance company to increase its rates
based on a so-called global climate change factor."
The request comes after devastating back-to-back hurricane seasons
that caused $30 billion in insured losses last year and as much as
$60 billion in losses from Hurricane Katrina this year, officials
The officials, who are part of the investor coalition, warn that the
losses will worsen if climate change trends continue and no action is
taken to face the challenge.
They want insurers to complete climate risk reports by August 2006
that address the types of risks they face as well as opportunities
for new markets and products related to climate change.
"While no individual weather event can ever be attributed to global
warming, scientific data indicate that rising global temperatures
will likely increase the frequency and intensity of hurricanes,
floods, drought, wildfires and other extreme weather events and
indeed may already be doing so," the officials wrote in a letter to
30 publicly held insurance companies.
The group also released a report warning that climate change will
result in more insurance claims, higher premiums and broader coverage
Thomas J. Wilson, president and chief operating officer of The
Allstate Corp., said in an interview Thursday that Americans face
a "protection gap" as the risk of catastrophic disasters increases
and the availability of affordable insurance decreases.
Allstate, the nation's second-largest auto and homeowner insurance
company behind State Farm, has cut back sharply on the number of
homes it insures in Florida and has said it likely will take similar
steps in Louisiana and other Gulf Coast states that were battered by
hurricanes Katrina and Rita.
He said "the increasing frequency and severity" of storms is exposing
the insurance industry to the possibility of unacceptably large
catastrophic losses. Some companies may stop writing policies
altogether, he said. Others may increase deductibles and raise
premiums to levels consumers would consider unfair.
"What we need is a government-sponsored, privately funded catastrophe
pool" to deal with severe hurricanes and earthquakes, Wilson said.
Wilson said such a system could be funded from higher premiums
charged to homeowners and businesses in high-risk areas.
The letter to the insurers was sent by state treasurers and
controllers from California, Connecticut, New York, Illinois,
Kentucky, Maryland, North Carolina, Oregon and Vermont. The
investors, who also include labor pension funds and a foundation, are
part of the Investor Network on Climate Risk.
The National Association of Insurance Commissioners is holding a
panel discussion on climate change on Saturday in Chicago.
AP Business Writer Eileen Alt Powell contributed to this story.