INSIGHT by Ceres
A new report unveiled yesterday finds that the U.S. insurance sector held $536 billion in fossil-fuel related assets in 2019, despite some insurers citing climate-related risk and natural disasters as factors in raising premiums and/or dropping coverage within certain high-risk regions.
The report, Changing Climate for the Insurance Sector, conducted by Ceres, ERM, and Persefoni, reveals that the top 16 U.S. insurers alone held more than 50 percent of the half trillion dollars in fossil fuel-related assets owned by the sector. The quantitative analysis was undertaken using U.S. Insurers’ 2019 assets compiled by the California Department of Insurance, the most complete and recent dataset currently available.
Some insurers are currently moving to curtail climate-related risk, with a growing number ceasing to offer certain policies in some locations. This includes State Farm’s May 2023 decision to stop offering new home insurance policies in California due to wildfire risk, Farmers’ July 2023 announcement that they will stop renewing almost a third of the policies the company has written in Florida, and close to 20 home insurers in hurricane-prone Louisiana either pulling out of the state or declaring insolvency.
“As the climate crisis intensifies, the insurance industry is finding itself uniquely exposed to climate-related challenges. Now is the time for insurers to take action to address these risks and opportunities related to their investments and underwriting. This will help to ensure their business models remain resilient and that they can continue to serve their customers effectively, while ultimately accelerating the transition to a low-carbon economy.”
-Tom Reichert, Group CEO of ERM
“This research once again emphasizes that climate risk is financial risk. Insurance companies must continue to evaluate their financed emissions and measure the impact they have through their fossil fuel-related assets. The technology to do this exists and will help the transition to a global decarbonized economy without penalizing businesses and consumers.”
-Kentaro Kawamori, CEO and Co-founder of Persefoni
“Insurance companies are facing increasing climate change risks as the frequency and severity of extreme weather events, such as hurricanes, floods, and wildfires escalate. This report reveals the urgent need for insurers to address the financial risks of climate change posed by their fossil fuel holdings and take advantage of opportunities to accelerate the transition of their investment portfolios to a clean energy future.”
-Mindy Lubber, CEO and president of the sustainability nonprofit Ceres
The report also revealed that the top two U.S. property and casualty companies, Berkshire Hathaway and State Farm Insurance, owned 44 percent of total fossil fuel-related assets owned by the entire sector. Asset ownership among life insurance companies was more broadly distributed, with the top two life insurance companies, TIAA Family Group and New York Life, owning 14 percent of assets owned by companies in that sector.
| about
ERM is the business of sustainability. As the largest global pure play sustainability consultancy, ERM partners with the world’s leading organizations, creating innovative solutions to sustainability challenges and unlocking commercial opportunities that meet the needs of today while preserving opportunity for future generations.
Ceres is a nonprofit organization working with the most influential capital market leaders to solve the world’s greatest sustainability challenges. Through our powerful networks and global collaborations of investors, companies and nonprofits, we drive action and inspire equitable market-based and policy solutions throughout the economy to build a just and sustainable future. For more information, visit ceres.org and follow @CeresNews.
Persefoni’s Climate Management & Accounting Platform (CMAP) provides businesses, financial institutions, and governmental agencies the software fabric for managing their organization’s climate-related data, disclosures, and performance with the same level of rigor and confidence as their financial reporting systems. The company’s software enables users to simplify the calculation of their carbon footprint, identify decarbonization strategies and perform climate trajectory modelling aligned to temperature rise scenarios set forth by the Paris agreement, and benchmark their impact by region, sector, and/or peer groups.
| All opinions expressed are those of the author and/or quoted sources. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.
