View Survey Of Insurance Companies’ Assessment And Disclosure Of Climate Change Risks

Comptroller William C. Thompson, Jr. today released a survey revealing that insurance companies routinely disregard global warming as an issue posing sufficient financial risks to warrant being included in the underwriting process.

“Scientific evidence suggests that global warming will affect a broad range of industries. However, the insurance sector will be particularly affected,” Thompson stated. “As the investment advisor to the City’s five Pension Funds, I am particularly concerned that the failure of these companies to fully consider potential climate-change risks in their underwriting process could adversely affect the financial performance of these companies and the Pension Funds’ investment interests.”

The Comptroller conducted the survey in response to a request by New York State Assemblyman Alexander Grannis to urge companies to disclose actions they have been taking to assess and mitigate climate change risks.

“As the chair of the Assembly’s Insurance Committee, I am constantly preached to by insurers about the ‘global’ nature of today’s insurance business,” Grannis said. “Yet, Comptroller Thompson’s report shows once again that United States insurers are way behind their European counterparts in measuring – and attempting to mitigate – the risks associated with global warming. I find it astonishing that United States insurers continue their head-in-the-sand approach to a problem that is so integral to the future viability of their business.”

Thompson surveyed 13 insurance companies in which the City’s Pension Funds have investments, asking companies to fully disclose any actions regarding risks posed by climate change. Eight of the 13 responded, and none provided any assurance that climate risk was seriously being assessed or considered.

One company, for example, reported that “it faced no significant or direct risks” and another noted that “we don’t believe that we are in a position to either predict or manage for unknown global climate changes in the absence of quantifiable evidence.”

Thompson noted that several companies expressed confidence that their assets or operations were diversified and capable of absorbing the financial risks associated with climate change.

“Given the increasing certainty of the science in this area and the increasing accuracy of prediction models, a passive approach to this issue will likely expose companies to greater risks,” Thompson said. “Insurance companies must recognize the urgency of climate risk and take prudent measures to asses and mitigate the potential risks. Both individual and institutional investors must insist that companies better assess and disclose these risks.”

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