» Insurers banking on climate change

Insurers banking on climate change

October 26, 2009 by Tom Guay
Posted in: Latest News & Views, News

The insurance industry’s certainly expecting the worst when it comes to climate change. It’s looking for ways to avoid or limit its liability for weather-related damages.

To be prepared, the industry’s partnering with scientists to study the risks that it’ll face due to climate change.

The industry’s think tank, the Willis Research Network (WRN), just partnered with Scripps Institution of Oceanography to study the risks posed by climate change to insurance and reinsurance companies.

The climate change initiative was prompted by the disclosure requirements ordered by the National Association of Insurance Commissioners. Starting in 2010, insurers with annual premiums of more than $500 million have to tell regulators and investors about the financial risks they’re facing due to climate change. They’ll also have to disclose what steps they’ll take to mitigate the risks.

The good news is that there are some opportunities for companies offering green products, materials and services.

The industry is developing various ways to prod, encourage or reward policy holders to invest in green products. Last year, California’s insurance department approved regulations to encourage the industry to offer green insurance policies. These cover the costs of environmentally friendly materials when rebuilding homes after a disaster. Items covered by these green insurance policies can include:

  • lighting
  • heating, cooling and plumbing supplies
  • windows and insulation, and
  • framing, roofing and siding materials that are energy efficient, more durable, sustainably produced or made from recycled materials.

There’s even a green angle to encourage less driving. California last month approved a pay-as-you-drive rule that lets insurance companies reduce premiums for those that cut back. However, the discount only applies to drivers logging less than 7,500 miles a year, so this seems like a limited green effect.

Peter Moraga with the Insurance Information Institute of California told the San Diego Union-Tribune that these green policies are all a “direct result of looking at climate change” and searching for ways to reduce the potential risks.

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