Insuring Disaster 2024: World’s largest insurance companies’ impact on climate, nature and humans

INSIGHT by ShareAction

A major investigation into the world’s 65 largest insurance companies from the responsible investment charity ShareAction shows that both people and planet face the triple whammy from insurance companies underwriting and investing in projects that are increasing global warming, damaging the natural environment and failing to protect human rights.

Insuring Disaster 2024 analyses the role Insurance companies play in supporting businesses with negative social and environmental impacts and shows how the lack of comprehensive policies in the sector is leading to support for increased fossil fuel production and the destruction of vital ecosystems for agriculture or mining.

Among the most shocking findings from the research, ShareAction found that:

• Only two of the insurers investigated have committed to rule out underwriting four of the world’s most controversial fossil fuel projects;
• Two thirds of the insurers fail to exclude underwriting for companies producing controversial armaments, such as chemical weapons and cluster bombs;
• 30% of insurers assessed scored 0 for policies that would protect the natural environment and biodiversity.

The report sets out how despite the insurance sector paying out over $100bn a year for the last four years in claims related to the impact of global warming, including increased flooding, storms and fires, insurers continue to invest in and underwrite the causes of catastrophes.

Commenting on the report’s findings, Head of Financial Sector Research at ShareAction, Claudia Gray, said:

“This report reveals the insurance sector’s abject failure to live up to its responsibilities to protect both people and planet. They have both a moral duty and business opportunity to adopt responsible investments and underwriting activities.”

To show how the top 65 insurers are performing, the report has created three league tables; one for Property and Casualty insurers, one for Life and Health insurers and one for Lloyds of London managing agents. These rate insurers in each of the three business categories from best to worst scoring them across 30 key standards. Just two institutions received more than half the available points in the survey, both based in France: AXA Group (52%) in the Property and Casualty ranking; and CNP Assurances SA (51%) in the Life and Health ranking.

Lloyd’s of London (UK) was among the worst performers, coming third from the bottom for its group policies. Almost half of its major managing agents failed to achieve a single key standard, including Aegis Managing Agency which scored 0% in the survey. Sony Financial Group Inc (Japan) scored 0% at the bottom of the Property and Casualty ranking, closely followed by Nationwide Mutual Insurance Co (USA). Protective Life Insurance Co (USA) is at the bottom of the Life and Health ranking, scoring less than 1%.

Commenting on the league tables, Jonathan Middleton, Senior Researcher at ShareAction said:

“What these rankings show is just how long a journey the insurance industry has to go on to meet net zero targets, protect nature and meet their obligations to safeguard human rights. It is vital that they begin that journey immediately to ensure a sustainable future for both people and planet as well as for the sake of their own long-term viability.”

The detailed analysis contained in Insuring Disaster 2024 has found a series of key failures of the insurance companies including:

1. Only two insurers have ruled out underwriting four of the most controversial fossil fuel projects across the globe. These projects include the Adani Carmichael Coal Mine in Australia, a mine so polluting that if it were a country it would be among the most highly-emitting in the world.
2. Our findings show a shocking number of insurers don’t place restrictions on the basis of human rights, worker health, conventional weapons or indigenous rights. Over 70% of insurers don’t have restrictions for any of these issues for the investing side of their business, and over 80% don’t have these restrictions for the underwriting side.
3. Some insurers are showing zero consideration for the natural world. This is despite biodiversity loss being recently recognized as one of the biggest risks to the economy by the World Economic Forum. Nineteen out of the 65 insurers got no marks at all on biodiversity.
4. The UK’s flagship Lloyd’s of London marketplace, where different insurance buyers and sellers come together to trade, is singled out in the report for having some of the weakest policies. Lloyd’s is so important because of its size and the fact that it makes up 9% of the world’s fossil fuel underwriting business. Yet almost half of the managing agents who are based there achieved the lowest grade of ‘F’.

To achieve the transition and bring about the meaningful change required to protect both people and planet, the report sets out 30 recommendations.

| Top 3 Recommendations to insurers  

1. Publicly disclose a comprehensive transition plan covering both underwriting and investment portfolios. Plans should align with a 1.5C net-zero pathway and outline in detail how the insurer will pivot its assets, operations, and entire business model towards a trajectory that aligns with climate science recommendations. To avoid allegations of greenwashing, insurers should fully disclose the dependencies and assumptions that underpin their plans.
2. Implement robust risk assessment and comprehensive biodiversity policies that restrict activities damaging areas of global biodiversity importance. These should particularly consider (but not be limited to) the protected areas network and Key Biodiversity Areas (KBAs).
3. Develop and disclose a policy on Free, Prior and Informed Consent (Indigenous rights), clearly stating how considerations of Indigenous and local community rights influence investment and underwriting decisions.

Where the insurance industry is not adopting these recommendations, policymakers and regulators should act to close the gap.

In the coming weeks the report’s authors will be meeting with many of the insurance companies investigated in this report to discuss the findings and how the insurance sector can play a more constructive role in managing their transition towards the policies that will protect both people and planet.

| 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.