Climate Risk Management in Insurance: Trends and Takeaways

The insurance industry faces unprecedented challenges due to climate change. According to a report conducted by Ceres Accelerator for Sustainable Capital Markets, as extreme weather events become more frequent and severe, insurers must grapple with the impact on their investments, risk management strategies and overall business operations.

The Highlights

Of the 516 insurance groups who submitted responses, 94% of the largest U.S. insurance companies reported on their risk management processes, 86% on climate strategy, 81% on governance and 29% on the metrics and targets used to help assess climate risks.  

Created through the examination of disclosures insurance companies are making through the National Association of Insurance Commissioners (NAIC) Climate Risk Disclosure Survey, the report is Ceres’ second annual analysis that the company has conducted of major U.S. insurers’ climate risk strategies.

Insights from the NAIC Climate Risk Disclosure Survey

The National Association of Insurance Commissioners (NAIC) has been studying climate change's impact on insurance since 2005. Their continued efforts to collect and analyze data play a crucial role in shaping regulatory policies.

The recent analysis by the NAIC sheds light on how insurers are navigating this complex landscape. Here are the key takeaways:

• Few insurers significantly alter their investment strategy due to climate change impacts on their investment portfolios. However, this area warrants further exploration as climate risks evolve.

• Over half of all insurance companies engage in enterprise-wide climate risk management. This proactive approach reflects the industry’s growing awareness of the need to comprehensively address climate-related risks.

• Most insurers, across various lines of business, actively engage in internal greenhouse gas management. This includes measuring emissions, setting reduction targets and integrating sustainability practices.

Powerful Resources for Insurance In-House Counsel

Insurers are increasingly recognizing the importance of climate-related activities. From risk assessments to sustainable investment practices, the industry is actively adapting to the changing climate landscape.

Insurers can navigate the impacts of the rising climate event risk with key Practical Guidance resources from LexisNexis®:

1. Navigate the legislative and regulatory efforts to mitigate climate change effects and discover how climate change influences workers’ compensation with The Impact of Climate Change on Workers and Employers: The California Experience.
2. Understand the climate change issues that might arise under a standard builder’s risk insurance policy for project owners, contractors and investors involved with renewable energy projects with Impact of Climate Change on Coverage under Builder's Risk Insurance Policies for Renewable Energy Projects.
3. Discover the emergence of parametric insurance with an outline of its origins, the operation of claims payment and trigger events and learn more about its U.S. and global coverage with Parametric Insurance: Addressing the Gaps in Traditional Coverage.

Get additional resources tailored for insurance in-house counsel with a 7-day free trial of Lexis+® General Counsel Suite.