Wed. Oct 4th, 2023
    New Report Reveals US Insurance Sector Holds $536 Billion in Fossil Fuel Assets

    A recent report conducted by Ceres, ERM, and Persefoni has revealed that the US insurance sector held a staggering $536 billion in fossil fuel-related assets in 2019. This is despite the fact that some insurers have cited climate-related risk and natural disasters as reasons for raising premiums or dropping coverage in high-risk regions. The top 16 US insurers alone accounted for over 50% of these assets.

    The report, titled “Changing Climate for the Insurance Sector,” highlights the unique exposure of the insurance industry to the climate crisis. While insurers have been taking steps to curtail their exposure to climate-related risks in their underwriting portfolios, there is less evidence that their investment portfolios are equally resilient. The findings indicate that financial and reputational risks associated with climate change are still prevalent within the sector.

    The report’s quantitative analysis, conducted using the 2019 assets of US insurers compiled by the California Department of Insurance, provides insights into the specific types of fossil fuel-related assets held by the insurance industry. These include tar sands, coal, oil and gas, and corporate utilities. The research also draws on interviews and focus groups with insurance company investment teams, regulators, and subject matter experts.

    The issue of climate risks has gained the attention of some members of Congress, with Senators Whitehouse, Wyden, and Sanders launching an investigation into how the US insurance industry evaluates climate-related risks. The senators have called on insurers to disclose why they continue to underwrite and invest in fossil fuel expansion projects despite the associated risks.

    The report underscores the urgent need for insurers to address the financial risks posed by their fossil fuel holdings and accelerate the transition to a low-carbon economy. It emphasizes that climate risk is financial risk, and insurers must evaluate their financed emissions and measure the impact of their fossil fuel-related assets on the global decarbonization process.

    In conclusion, while some insurance companies are taking steps to mitigate climate-related risks, the report reveals that the sector as a whole still holds significant investments in fossil fuels. It calls for a harmonized approach to climate change across underwriting, risk assessment, and investing functions within the industry.

    Source: Ceres, ERM, and Persefoni, “Changing Climate for the Insurance Sector” report.