Activist Report Shows More Insurers Making Climate-Related Disclosures

A new report from a climate activist group portrays a “mixed picture of progress and persistent challenges” in the insurance sector in addressing climate-related risks, with some insurers successfully integrating climate-related risks and others leaving “significant gaps and disparities.”

The second annual analysis from climate leadership advocate Ceres examines major U.S. insurers’ climate risk strategies in disclosures made under the National Association of Insurance Commissioner’s Climate Risk Disclosure Survey.

The analysis, conducted with Manifest Climate, is based on responses submitted to the California Department of Insurance from 516 insurance groups totaling more than 1,695 individual companies that that represent more than $2 trillion in direct premiums written in 2022.

The responses are aligned with the Task Force on Climate-related Financial Disclosures (TCFD) framework, which include governance, strategy, risk management and metrics and targets. Findings include:

More insurance groups provided disclosures this year: 516 groups responded this year, up from 494 a year ago.
94% of the insurance groups are reporting on risk management, 86% on strategy, 81% on governance and 29% on metrics and targets.
26% of the insurance groups reported on parameters across the four TCFD broad categories, while 44% disclosed on three of the four.

“The urgency of climate risk for the insurance sector requires a significantly faster ramp‑up in all the areas of the Climate Risk Disclosure Survey, given the accelerating pace of climate change and its devastating effects,” the report states. “As regulators and stakeholders increasingly recognize the systemic nature of climate risks, the pressure on insurers to improve their disclosure practices will only intensify.”

German Heat Waves

Insured losses from flooding in Southern Germany from mid-May 15 to early June will range EUR 2.4 billion ($2.6 billion) to EUR 3.6 billion ($3.9 billion), according to the Extreme Event Solutions business unit at Verisk.

Heavy rains during the week from May 31 and June 3 contributed to much of the flooding. According to the German Weather Office, 120 to 160 liters of rain fell per square meter across southern Germany during that period, more than what usually falls in the region across an entire month.

Most of the flooding occurred along parts of the upper Danube River and several of the Danube’s southern tributaries, with the worst impacts in Germany in Bavaria and Baden-Württemberg. Flooding submerged streets, highways, homes and businesses, a dam on the Paar River broke in two places in a Bavarian district, and a dike and a dam also broke in Diedorf, Verisk reported.

Elsewhere in Bavaria, the Schmutter, Cham, Paar, Ilm, Danube and Isar rivers reached above the highest warning levels in several locations. And in Baden-Württemberg, homes and businesses were also flooded, and an estimated 95,000 hectares of farmland were inundated. The German Insurance Association reported nearly half of all structures in Bavaria are insured for flood, and in Baden-Württemberg that figure exceeds 90% because flood protection was a compulsory in property insurance until 1994.

Verisk’s industry insured loss estimates include physical damage to property (residential, commercial, industrial, auto, agriculture), both structures and their contents, from both on- and off-floodplain flooding, and additional living expenses for residential claims and business interruption for commercial claims.

Super-Wild Weather

An era of super-wild weather is here, prompting the U.S. National Academy of Sciences to recommend a major reboot of the country’s “probable maximum precipitation” estimates that guide infrastructure development – the first update since 1999 nationally, according to a Bloomberg article on Insurance Journal.

The report highlights more than aging 16,000 at-risk dams and 50 nuclear power plants facing new weather extremes and lays out ways to use climate models to update weather and infrastructure analyses to account for a changing climate. It is essentially an acknowledgment that “super-wild weather” is entering a new phase and the nation needs to start preparing, John Nielsen-Gammon, a professor at Texas A&M University, who co-authored the study, told Bloomberg.

The article notes that millions of residents along the eastern seaboard of the U.S. this week will be under a heat dome, temperatures in Manhattan’s Central Park are set to reach 95F, and Florida is in its second week of rainfall so intense near Sarasota that it has odds of occurring just once in 500 to 1,000 years.

“The first half of 2024 has laid bare the catastrophic extremes that now characterize the rapidly changing climate on every continent,” the article states.

Green Bonds

Green bonds are on course for $1 trillion in deal volume in 2024.

The first quarter of 2024 “was the most prolific on record for sustainable finance volumes,” the Climate Bonds Initiative latest Quarterly Market Report released this week shows.

There were $272.7 billion of aligned green, social, sustainability, sustainability-linked and transition bond volume added in the first quarter of 2024. That was 15% more than the $237.2 billion recorded in Q1 2023, and 41% more than the $193bn from Q4 2023, according to Climate Bonds.

The report’s bonds breakdown includes:

Green ($195.9 billion)
Social ($42.3 billion)
Sustainability ($31.4 billion)
Sustainability-linked ($3.1 billion)

“Sustainable finance has been quick off the blocks in 2024 and we could see a record year nearing $1 trillion of green bonds alone,” stated Caroline Harrison, director of technical development for Climate Bonds. “The sustained growth in this market reflects the enthusiasm of issuers to decarbonise their operations as swiftly as possible and seize the opportunities for growth. The leading role that sovereign issuers are taking in this space suggests that the urgency of the transition is being endorsed from the top down.”

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