Global warming and climate change may cause green insurance companies to pay higher disaster claims.
Climate change is leading to a larger number of natural disasters that are causing a greater amount of damage so that insurers are faced with much higher claims as well as lawsuits related to global warming, forcing these firms to protect themselves with green insurance and keeping up with alternative energy resources.
It hasn’t taken insurers long to recognize the difference that climate change is making, but the steps that need to be taken in order to compensate for the change in risk have not yet become obvious to them. However, due to the fact that it is the insurance industry that is likely to be among the first to experience the impact in these environmental changes, it is surprising that they have not already taken on more measures to protect themselves.
Representatives from the industries and analysts are indicating that it does not appear that insurers see any urgent need to change the way that they are coping with these increasing threats of enormous weather-related damage claims in the near and not-so-near futures, and from the rising amount of litigation linked to climate change.
Recent data shows only 11 percent of insurers have formal climate change policies.
This statistic was from a report that Ceres published in September 2011. It showed that among 88 leading American insurance companies, who had made disclosures to the National Association of Insurance Commissioners (NAIC), only 11 percent had implemented formal policies for climate change, while only 60 percent were performing climate risk assessments.
The central issue here is that green insurance companies are at the very heart of how climate change is being dealt with as a whole. They put a price tag on the risk caused by weather events for property owners and, in doing so, send the rest of the economy an important indication regarding the severity of the threat. Moreover, they represent a global investment of $23 trillion, and if they do not adequately take into account the risks that they will be facing, this will increase their financial vulnerability, which could have significant consequences on the world economy.
