The Climate Changes for the Insurance Industry
Following the most damaging year of climate disasters in the United States in history, the insurance regulators in three states – California, Washington, and New York – announced that all major insurance companies operating in their states will be required to assess and publicly disclose the climate-change related risks they face, both in their underwriting as well as in their investment activities. Because of the consolidation of the insurance industry, this state-level action is effectively a national policy, as it affects 90 percent of the entire U.S. insurance market.
The link between insurance and climate change is often overlooked. Evan Mills at Lawrence Berkeley National Lab has been a leader in exploring this issue. His website provides information about the impact of climate change on the industry and on the innovative programs some companies have adopted to address the issue. I’ve had him speak to my classes a couple of times, and the students are always fascinated by the link between insurance and climate. European reinsurance companies– basically, the companies that take over when losses are too high for ordinary insurance companies to handle — have been worried about the effect of climate change on their businesses for years. The U.S. companies are still playing catchup.