Major U.S. Insurers Make Progress on Climate Disclosures, but Significant Gaps Remain
Report by Ceres analyzes insurers' alignment with global climate disclosure standards
June 18, 2024 /3BL/ - A new report released today by Ceres reveals that while major U.S. insurance companies are making progress in disclosing their climate-related risks and strategies, significant gaps and disparities persist across the sector.
The report, Navigating Climate Risks: Progress and Challenges in U.S. Insurance Sector Disclosures, analyzes the disclosure reports from 516 insurance groups, which total more than 1,695 individual companies, submitted to the National Association of Insurance Commissioners' (NAIC) Climate Risk Disclosure Survey for reporting year 2022. The survey is aligned with the framework developed by the Task Force on Climate-related Financial Disclosures (TCFD), the leading global standard for corporate climate risk disclosure.
Key findings from the report:
- 94% of insurers reported on risk management processes, 86% on strategy, 81% on governance, but only 29% disclosed metrics and targets related to climate risks.
- Just 26% of insurers provided disclosures across all four pillars of the TCFD framework (governance, strategy, risk management, metrics and targets).
- A year-over-year comparison showed slight improvement in risk management integration, identifying climate risks and opportunities, and reporting greenhouse gas emissions.
- However, insurer disclosures declined in two areas: describing management's role in assessing climate risks and setting targets to manage risks and opportunities.
- Adoption of climate scenario analysis is increasing but still low, with only 116 insurance groups (22%) conducting this forward-looking assessment in 2022.
(Editor’s note: These and the other measurements only reflect that reporting in these areas is included. It does not reflect that all of them are comprehensive in nature.)
"The accelerating frequency and severity of climate disasters underscores the urgency for the insurance industry to enhance disclosure and develop robust climate transition plans," said Jaclyn de Medicci Bruneau, report lead author and Director of Insurance at the Ceres Accelerator for Sustainable Capital Markets. "Transparent reporting is crucial, but it must be followed by concrete actions to build resilience across underwriting activities and investment portfolios. While there is debate across US society about the value of corporate climate disclosure, this shows that the insurance industry is already ahead and the value of these reports."
The report highlights best practices from insurers demonstrating leadership, and provides recommendations for companies and regulators, such as:
- Establishing common methodologies and scenario analysis frameworks
- Setting clear board and management oversight for climate issues
- Investing in tools to measure greenhouse gas emissions across all scopes
- Engaging constructively on climate policy and regulatory development
With insurers facing mounting claims from climate-fueled disasters, the report emphasizes the need for accelerated action to maintain affordability and availability of coverage in high-risk areas.
In addition to response analysis, Ceres commissioned Manifest Climate, the leading climate intelligence software, to analyze TCFD-alignment using its proprietary methodology and AI-powered platform.
“This report offers invaluable insights that insurance companies across the United States can use to benchmark against their peers and adopt best practices," said Laura Zizzo, co-founder and CEO of Manifest Climate. “As climate risks escalate, society, businesses and governments now look to the insurance sector for leadership in risk identification and management. Manifest Climate is committed to leveraging its AI-powered climate intelligence platform, and in-house climate expertise to support the sector's transformation, especially on the crucial metrics and targets pillar that remains a challenge,” Zizzo added.
"Climate risk is an existential threat that requires urgent focus from the entire insurance sector," said Andrew Mais, Connecticut Insurance Commissioner and President of the National Association of Insurance Commissioners. "This timely analysis provides a roadmap for insurers to strengthen their climate strategies and build a more resilient industry that protects policyholders and supports economic stability."
This is Ceres’ second annual report analyzing the insurance industry’s annual TCFD disclosures. In 2023 Ceres, in partnership with the California Department of Insurance and Manifest Climate, released the first systematic review of U.S. insurance companies’ climate risk strategies.
EDITOR’S NOTE:
Ceres will discuss this analysis at an open meeting of the National Association of Insurance Commissioners’ Climate and Resiliency Task Force – Climate Risk Disclosure Workstream at 3 p.m. ET, Tuesday, July 9. This event is open to the media.
Confirmed speakers include:
- Commissioner Gordon Ito, Hawaii Department of Commerce and Consumer Affairs, Insurance Division
- Steven Rothstein, Managing Director, Ceres Accelerator for Sustainability Capital Markets, Ceres
Please RSVP Diane May, dmay@ceres.org, for media registration details.
About Ceres Accelerator for Sustainable Capital Markets
The Ceres Accelerator for Sustainable Capital Markets is a center within Ceres that aims to transform the practices and policies that govern capital markets by engaging federal and state regulators, financial institutions, investors, and corporate boards to act on climate change as a systemic financial risk. For more information, visit ceres.org/accelerator.
About Manifest Climate
Manifest Climate is the leading Climate Intelligence Software that provides decision-makers with climate-related insights and recommendations to inform decisions, seize opportunities and mitigate risk. Manifest Climate uses industry-leading AI models to create comparability from qualitative climate information faster, more accurately and more consistently than humans. Issuers, service providers and financial institutions choose Manifest Climate for ease of use, in-house climate expertise, and depth of qualitative climate data. With Manifest Climate, teams reduce time spent on manual research by 99%, improving precision and consistency as a result. Learn more at www.manifestclimate.com.
Media Contact: Diane May, dmay@ceres.org, 617-247-0700 ext. 220
