US Insurance Sector's Fossil Fuel Assets Amid Climate Risk: New Report Insights
A recently released report has brought to light that, in 2019, the U.S. insurance industry possessed approximately $536 billion in assets linked to the fossil fuel sector. Interestingly, this comes despite certain insurance companies pointing to climate-related threats and natural calamities as reasons for increasing premiums or discontinuing coverage in specific high-risk areas.
The study, titled "Changing Climate for the Insurance Sector," was conducted collaboratively by Ceres, ERM, and Persefoni. It divulges that the largest 16 insurers in the U.S. held more than half of the total $500 billion fossil fuel-linked assets within the industry. The report's findings are based on a meticulous quantitative analysis of the 2019 assets of U.S. insurers, sourced from the California Department of Insurance – considered the most comprehensive and up-to-date dataset available.
Signs are emerging that some insurers are now taking steps to mitigate climate-related risks, with a growing number opting to discontinue specific policies in certain geographical regions. For instance, in May 2023, State Farm made the decision to cease offering new home insurance policies in California due to the heightened risk of wildfires. Similarly, Farmers announced in July 2023 that they will not renew nearly a third of their policies in Florida. Additionally, in hurricane-prone Louisiana, nearly 20 home insurers have either withdrawn from the state or declared insolvency.
“As the climate crisis intensifies, the insurance industry is finding itself uniquely exposed to climate-related challenges. Now is the time for insurers to take action to address these risks and opportunities related to their investments and underwriting. This will help to ensure their business models remain resilient and that they can continue to serve their customers effectively, while ultimately accelerating the transition to a low-carbon economy,” said Tom Reichert, Group CEO of ERM.
“This research once again emphasizes that climate risk is financial risk. Insurance companies must continue to evaluate their financed emissions and measure the impact they have through their fossil fuel-related assets. The technology to do this exists and will help the transition to a global decarbonized economy without penalizing businesses and consumers,” said Kentaro Kawamori, CEO and Co-founder of Persefoni.
“Insurance companies are facing increasing climate change risks as the frequency and severity of extreme weather events, such as hurricanes, floods, and wildfires escalate. This report reveals the urgent need for insurers to address the financial risks of climate change posed by their fossil fuel holdings and take advantage of opportunities to accelerate the transition of their investment portfolios to a clean energy future,” said Mindy Lubber, CEO and president of the sustainability nonprofit Ceres.
The report also revealed that the top two U.S. property and casualty companies, Berkshire Hathaway and State Farm Insurance, owned 44 percent of total fossil fuel-related assets owned by the entire sector. Asset ownership among life insurance companies was more broadly distributed, with the top two life insurance companies, TIAA Family Group and New York Life, owning 14 percent of assets owned by companies in that sector.
The study, titled "Changing Climate for the Insurance Sector," was conducted collaboratively by Ceres, ERM, and Persefoni. It divulges that the largest 16 insurers in the U.S. held more than half of the total $500 billion fossil fuel-linked assets within the industry. The report's findings are based on a meticulous quantitative analysis of the 2019 assets of U.S. insurers, sourced from the California Department of Insurance – considered the most comprehensive and up-to-date dataset available.
Signs are emerging that some insurers are now taking steps to mitigate climate-related risks, with a growing number opting to discontinue specific policies in certain geographical regions. For instance, in May 2023, State Farm made the decision to cease offering new home insurance policies in California due to the heightened risk of wildfires. Similarly, Farmers announced in July 2023 that they will not renew nearly a third of their policies in Florida. Additionally, in hurricane-prone Louisiana, nearly 20 home insurers have either withdrawn from the state or declared insolvency.
“As the climate crisis intensifies, the insurance industry is finding itself uniquely exposed to climate-related challenges. Now is the time for insurers to take action to address these risks and opportunities related to their investments and underwriting. This will help to ensure their business models remain resilient and that they can continue to serve their customers effectively, while ultimately accelerating the transition to a low-carbon economy,” said Tom Reichert, Group CEO of ERM.
“This research once again emphasizes that climate risk is financial risk. Insurance companies must continue to evaluate their financed emissions and measure the impact they have through their fossil fuel-related assets. The technology to do this exists and will help the transition to a global decarbonized economy without penalizing businesses and consumers,” said Kentaro Kawamori, CEO and Co-founder of Persefoni.
“Insurance companies are facing increasing climate change risks as the frequency and severity of extreme weather events, such as hurricanes, floods, and wildfires escalate. This report reveals the urgent need for insurers to address the financial risks of climate change posed by their fossil fuel holdings and take advantage of opportunities to accelerate the transition of their investment portfolios to a clean energy future,” said Mindy Lubber, CEO and president of the sustainability nonprofit Ceres.
The report also revealed that the top two U.S. property and casualty companies, Berkshire Hathaway and State Farm Insurance, owned 44 percent of total fossil fuel-related assets owned by the entire sector. Asset ownership among life insurance companies was more broadly distributed, with the top two life insurance companies, TIAA Family Group and New York Life, owning 14 percent of assets owned by companies in that sector.
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