US lawmakers are investigating a possible contradiction in investments made by insurers.
Insurance companies have been whittling down the coverage they provide in states facing extreme climate risks because the risks in those locations are considered to be too costly for their businesses to survive.
However, lawmakers say several insurers are making these claims despite continuing to invest in fossil fuels.
US lawmakers have therefore launched an investigation into seven large US insurance companies for pointing to climate change as a reason for reducing coverage in certain states, while continuing their investments of billions of dollars into fossil fuel projects. This, according to documents cited in a recent The Washington Post report.
Earlier this month, the Senate Budget Committee issued letters to the seven affected insurers or owners of the insurers. They included: State Farm, AIG, Liberty Mutual, Berkshire Hathaway, Chubb, Travelers Insurance, and Star. The letter demanded answers and internal practices information regarding the way each insurer underwrites, makes investments in, and profits from the fossil fuel industry.
The inquiry is also investigating how the insurance companies are following the Paris Agreement commitments.
The investigation is seeking to understand if the insurers have made any plans to align with the Paris Agreement’s commitment to reducing global warming, and how their projections and methodologies for coverage and rates are linked to climate harm. The insurers have been given a response deadline of June 23, by which time they must provide all the necessary information.
The response insurance companies have had in the United States when it comes to disasters increasing in frequency and intensity has caused millions of people across the country to face uncertainty regarding their ability to obtain coverage, and rising costs when coverage is available, said the report in The Washington Post.
While the industry’s success is dependent on its ability to predict risk and loss – something that has become much more difficult with the impact of climate change – lawmakers are pointing to a lack of transparency regarding how insurers identify, price, and factor those risks into their decisions and policies. They argue that an investment of about $582 billion into fossil fuels means that insurers are contributing to the crisis from which they are suffering.
