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Insurance industry woefully unprepared for climate change: report

Only a small fraction of major insurance companies have formal climate change policies, despite the massive financial risks posed by extreme weather, a new report concludes.

“With the world still reeling from the devastating impacts of an economic crisis triggered by hidden risks in the banking sector, we can ill afford a new problem triggered by hidden risks in another,” reads an analysis produced by Ceres, a coalition of investors, environmental groups and others.

The group analyzed survey data which revealed that a scant 11 out of 88 U.S. insurance firms have coherent strategies to assess and manage the economic liabilities associated with global warming.

More than 60 percent of survey respondents have no formal plan whatsoever, the Ceres report noted.

And most industry attention is focussed on coastal weather events such as hurricanes, it added, largely ignoring the liabilities of increased droughts, snowstorms and other in-land issues.

Those liabilities appear to be mounting, with the cumulative impact this year of floods, tornadoes and heat waves in America already exceeding US$35 billion.

“The industry that underlies every aspect of our modern economy has developed over the past 300 years during a time of relative climate stability,” the report reads. “[Climate change] will profoundly alter insurers’ business landscape.”

That could also have profound implications for the global economy, which is inextricably linked to $23 trillion in investments controlled by the insurance industry.

But Ceres noted those implications don’t necessarily have to be negative.

“Insurers have begun to discover that some of the technologies and behaviours which reduce greenhouse gas emissions – like driving less or building using green technologies – actually result in reduced risk of loss,” the report reads.

“With their estimated $5.9 trillion in invested capital, American insurers can help to enable the domestic economy’s transition to a secure energy future while meeting investment goals.”

Geoff Dembicki reports on energy and climate issues for The Tyee.

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