What Should Insurance Companies Do About Climate Risks?

October 1, 2023by SHMA

According to a 2019 global poll, 72 percent of insurance businesses believe climate change would have an impact on their business, but 80 percent have not taken major actions to mitigate climate risks. Furthermore, insurance companies invest the money they collect in the financial markets. They have $582 billion invested in fossil fuels, which may lose value as climate concerns mount.

To deal with its own climate risks, the insurance industry must undertake significant changes. Some of these changes may also enable insurance companies to help accelerate the transition to a net-zero society. Here are some suggestions.

The Center for American Progress, a non-partisan policy institute, recommends that:

  • Insurance companies should recognize climate risks, include them in business choices and make them public.
  • Businesses should put their own resilience to the test by simulating multiple climate scenarios.
  • States, which govern the insurance business, should collect data on climate risks and use the findings to establish incentives for sustainable home retrofitting and fortification, as well as to design robust building standards.