A coalition of investors, companies and public interest groups that promote sustainable business practices has issued a report urging insurance companies to consider increased risks from climate change and extreme weather losses. Based on industry financial results provided by A.M. Best Co., the September 2012 Ceres report claims that floods, heat waves, hailstorms, tornadoes, and other extreme weather events cost U.S. property and casualty insurers $34 billion in 2011. The report also notes that although insured property losses for 2012 have thus far been lower than those recorded the previous year, the U.S. drought is expected to cost insurers approximately $20 billion, the highest losses from drought since 1988.
Ceres thus concludes that insurers need to better anticipate changes in climate and weather extremes to adapt their pricing models and promote effective risk management strategies to customers. In addition to providing examples of new insurance policies and products, the report calls on insurance companies to become more involved in building and infrastructure planning to reduce weather vulnerabilities and urges regulators to strengthen and expand mandatory climate-risk disclosure. It also recommends that investors and rating agencies encourage insurers to improve disclosure of purported climate-change risks.