By Adam Riedel, CCCL Associate Director
The insurance commissioners in three states, California, New York and Washington, have announced that they will require insurance companies in their respective states to complete a 12-question survey on the risks to insurers posed by climate change. California administered the survey in 2009 and 2010 to some large insurers operating in that state. Under the newly announced requirements, all insurers in California, New York and Washington writing more than $300 million in policies nationwide will be required to complete the survey by May 1, 2012.
The action taken by the three states comes on the heels of the most damaging year of U.S. natural disasters in history. With the U.S. insurance industry paying out tens of billions of dollars in claims related to weather-related disasters in 2011, many investors are starting to see climate change as a significant risk to the financial performance of insurance companies. Jack Ehnes, the chief executive of the California State Teachers Retirement System, which has $148 billion investments, said of the new requirements, “If we feel insurance or energy companies are not incorporating climate risk into their analyses and their boards of directors are not recognizing it, that failure to do so endangers the value of that investment.”
It is hoped that the new requirements will spur the industry to more fully disclose the risks posed by climate change to insurers and develop policies to adequately manage these risks. According to Ceres, a non-profit group focused on working with a coalition of investors, environmental groups and other non-profits to encourage companies to address sustainability challenges such as climate change, only 11 out of 88 insurance companies that completed the survey last year reported having formal policies to manage climate change.
