From its origins in the coffee houses of London during the late seventeenth century until now, the modern insurance industry has always been affected by the vagaries of the weather. The Lutine Bell traditionally rang out in the Lloyd\u2019s Building in London to alert underwriters to impending bad news like the sinking of a merchantman with an insured cargo during a storm.<\/p>\n
Nowadays, the weather impacts insurance companies in two distinct ways. First, there are the claims. Worldwide damage\u00a0 and\u00a0 weather-related-losses\u00a0 have\u00a0 increased\u00a0 from\u00a0 an\u00a0 annual\u00a0 average\u00a0 of\u00a0 $50bn\u00a0 in the\u00a0 1980\u2019s\u00a0 to\u00a0 nearly $200bn\u00a0 this\u00a0 decade\u00a0 according\u00a0 to figures\u00a0 recently released\u00a0 by\u00a0 the World\u00a0 Bank.\u00a0 Secondly, there\u00a0 is\u00a0 the\u00a0 physical effect\u00a0 on the\u00a0 investments\u00a0 held\u00a0 by insurance\u00a0 companies from\u00a0 extreme\u00a0 weather\u00a0 events\u00a0 as\u00a0 well\u00a0 as the\u00a0 impact\u00a0 of new carbon regulations and disclosure rules on their portfolios.<\/p>\n
That\u2019s why the Chairman of Lloyd\u2019s, John Nelson, has said that understanding and incorporating climate change into\u00a0 future\u00a0 modelling\u00a0 has\u00a0 become\u00a0 essential\u00a0 for\u00a0 anybody\u00a0 making\u00a0 long-term\u00a0 financial\u00a0 commitments,\u00a0 be\u00a0 that investing\u00a0 in\u00a0 infrastructure\u00a0 &\u00a0 housing\u00a0 or\u00a0 making\u00a0 public policy.\u00a0 So\u00a0 how\u00a0 has\u00a0 the\u00a0 industry\u00a0 been\u00a0 addressing\u00a0 the problem since Hurricane Sandy devastated parts of the north eastern seaboard of the United States in 2012?<\/p>\n
Initially, it didn\u2019t do much. A report by advocacy group Ceres in 2014 ranked the largest 330 insurance companies with a presence in the United States by what they said they were doing to address the problem. The most pro-active among them were ACE, Munich Re, Swiss Re, Allianz, Prudential, XL Group, the Hartford, Sompo Japan & Zurich. By contrast health & life and annuity providers, which between them hold two thirds of the industry\u2019s overall investments, ranked poorly.<\/p>\n
However, since then the intervention of the SEC in America and the Prudential Regulatory Authority in the UK has\u00a0 pushed\u00a0 climate\u00a0 change\u00a0 higher\u00a0 up\u00a0 the\u00a0 agenda\u00a0 and\u00a0 led to\u00a0 greater\u00a0 disclosure\u00a0 in\u00a0 general.\u00a0 To\u00a0 give\u00a0 some examples, brokers are now including new \u201cgreen clauses\u201d in buildings\u2019 policies which specify types of materials and design. Climate risk management advice is being given to companies on their supply chains. And health, life &\u00a0 annuity\u00a0 providers\u00a0 are\u00a0 increasingly\u00a0 defining\u00a0 environmental\u00a0 as\u00a0 well\u00a0 as\u00a0 social\u00a0 &\u00a0 governance\u00a0 criteria\u00a0 in\u00a0 their investment mandates.<\/p>\n
“The\u00a0 rating\u00a0 agencies\u00a0 are\u00a0 now\u00a0 insisting\u00a0 on\u00a0 robust\u00a0 asset\/liability\u00a0 management\u00a0 capable\u00a0 of\u00a0 mitigating\u00a0 the\u00a0 double exposure\u00a0 of\u00a0 their\u00a0 clients\u00a0 to\u00a0 both\u00a0 claims\u00a0 and\u00a0 investments.\u00a0 As\u00a0 the\u00a0 Washington\u00a0 insurance\u00a0 commissioner,\u00a0 Mike Kriedler,\u00a0 said\u00a0 recently: \u201cThis\u00a0 is\u00a0 not\u00a0 just\u00a0 a\u00a0 partisan\u00a0 issue,\u00a0 it\u2019s\u00a0 about\u00a0 financial\u00a0 solvency\u00a0 as\u00a0 well\u00a0 as\u00a0 consumer protection.\u201d But although for many the debate appears to have moved on, there remain some for whom it has not. The American Coalition for Clean Coal Electricity recently criticised the peer-reviewed, 840-page national climate assessment report as \u201cfull of unsubstantiated tactics & hyperbole.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
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