The Polar Vortex And Climate Change
A new report outlines the numerous risks insurers face from climate change. Intelligent climate change investors must take steps to “limit economic exposure to expensive failures while, at the same time, preserving exposure to the enormous upside potential brought about by the upcoming paradigm shift.”
The report from Sustainalytics, a provider of ESG (environmental, social and governance) and corporate governance products and services, shows that property/casualty insurers face two key points of exposure to climate risks in 2019 and beyond: escalating cost of payouts for climate change-driven catastrophes; carbon-related risks from underwriting and investment activities.
The report draws on a study from Aon Benfield that shows 2017 was the costliest year on record for weather related damages, with $344 billion in total economic losses globally and insured losses reaching $132 billion, three times the 2000-2016 average.
“On top of the physical risks, P&C insurers’ underwriting and investment activities expose them to indirect carbon risks,” the report states. “By underwriting coverage for fossil fuel projects, the insurance industry enables projects that worsen climate change, which increases the frequency and severity of extreme weather.”
As large investors, insurers can direct funding to companies and assets geared towards the transition to a low-carbon economy – currently only 1 percent of assets invested by 80 major global insurers were allocated to low-carbon investments, according to the report.
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