Australian insurers not keeping pace with climate change – report

Australian insurers not keeping pace with climate change – report | Insurance Business

Australian insurers not keeping pace with climate change – report

As climate impacts intensify, so does the urgency to reduce greenhouse gas emissions – and one important step to doing this is for Australian companies to disclose their climate risks, not just to inform shareholders of how secure (or not) their capital is, but more importantly, to allow Australians to see just how perilous the future is becoming.

Insurance companies, in particular, need to disclose an analysis of how they perform in a scenario where global warming is held to 2ºC or below. This is because insurance companies attach dollar values to climate risks to transport, agriculture, infrastructure, and most other sectors; and disclosing these figures to the broader public will inform them just how acute the risks of climate change are.

Only seven of the top 50 ASX companies have disclosed their climate risks, however; and despite the continuing strain of natural disasters to profitability, none of Australia's big three general insurers seem to be keeping pace with climate change, The Sydney Morning Herald reported.

Last year saw insurers pay out a record US$135bn globally on natural disasters, partly due to the triple-whammy of hurricanes Harvey, Irma, and Maria, hitting the US and Caribbean; the wildfires in California; and for Australian general insurers, Tropical Cyclone Debbie.

SMH noted that although every company faces climate risk to some extent, for QBE it is both acute and direct since climate change impacts manifest as claims – that, and the thorny issue of the world becoming uninsurable.

Last October, QBE announced that it expected 2017 to be the costliest year in the history of the global insurance industry, flagging a $767m (US$600m) hit to its pre-tax earnings. For QBE, individual large claims and natural hazards in 2017 cost the insurer $1.7bn, or 15% of the company’s net earned premium. It had also received its fourth downgrade of the financial year by January; but so far, no climate risk disclosure has been forthcoming from the insurer.

Globally, insurers have begun to respond to the threats of climate change, although most still keep their assessment of the risk a closely guarded secret.

AXA, Allianz, Aviva, Lloyds, Munich Re, SCOR, and Swiss Re are among those to have divested from coal companies from their investment portfolios, and/or restricted underwriting to the coal industry, on the theory that by investing in or actively supporting the source of the problem, insurers are exposing themselves to the impacts of climate change, SMH reported.

Suncorp also announced at its annual general meeting last year that it would cut exposure to fossil fuels in its equity portfolio to a negligible amount over the next two years.

QBE, however, has made no such action. But perhaps with the new leadership in Pat Regan, investors will start to see QBE join other insurers in disassociating themselves from the activities that cause climate change and disclosing the extent to its threat, SMH said.

Related stories:
Zurich chief warns of “ecological Armageddon”
Australia’s natural tourist spots in the “firing line” of climate change – report