Ace Ltd, Allianz and XL Group, all with significant presences in Bermuda, are among just nine insurance sector players best prepared to manage climate change-related risk, according to US-based advocacy group Ceres.

In a report that authors Ceres describes as a ‘first-of its kind’ it noted the companies are among just nine to which Ceres awarded a ‘leading’ ranking. The report stated: “Nine of ... 330 companies — three percent overall — received the ‘leading’ rank, including ACE, Munich Re, Swiss Re, Allianz, Prudential, XL Group, The Hartford, Sompo Japan and Zurich. The Hartford and Prudential are the only US-headquartered insurers among the nine firms.” Three of the nine top scoring companies were global reinsurance companies — Munich Re, Swiss Re and XL Group.

Ceres says it ranked the nation’s 330 largest insurance companies on what they are saying and doing to respond to escalating climate risks.

They: “ ... found strong leadership among fewer than a dozen companies but generally poor responses among the vast majority.”

Their report, entitled ‘Insurer climate risk disclosure survey report and scorecard: 2014 findings and recommendations’, ranks property and casualty, health and life and annuity insurers that represent about 87 percent of the total US insurance market.

According to the report, the companies were ranked on a half-dozen climate-related indicators, including governance, risk management, investment strategies, greenhouse gas management and public engagement, such as their climate policy positions. The report is based on company disclosures last year in response to a climate risk survey developed by the National Association of Insurance Commissioners (NAIC).

Mindy Lubber, president of Ceres, which is a non-profit sustainability advocacy group, is quoted saying: “Despite being on the ‘front line’ of climate risks, most of the company responses show a profound lack of preparedness in addressing climate-related risks and opportunities. A big positive in the report’s findings is the strong leadership among a small number of property and casualty insurers — a trend that needs to become far more mainstream if the industry is to accelerate global responses to this colossal threat.”

The vast majority of the insurers — 276 of the 330 companies — earned ‘beginning’ or ‘minimal’ ratings. The heath and life and annuity insurers had especially weak responses, with 89 percent and 80 percent, respectively, receiving the lowest ‘minimal’ rating.

Among the report’s key findings:

• Overall, larger insurers — over $5 billion in direct premiums — showed stronger climate risk management practices than smaller companies.

• While the P&C sector had higher overall scores than the health and L&A segments, only eight of the 193P&C firms — four percent — earned a ‘leading’ rating and only 20 percent had a ‘developing’ rating.

• Nearly half of P&C insurers have taken positive steps in terms of climate modelling and analysis. In many instances, insurers are using climate-informed catastrophe models to better quantify climate-related risks from more frequent and intense weather catastrophes.

• Only 13 of the P&C insurers — seven percent — earned a ‘leading’ rating for climate risk governance practices, including The Hartford and Catlin, which have cross-functional committees that monitor/report to senior management and their boards of directors on climate risks and opportunities.

• Despite evidence that extreme heatwaves and other climate-related impacts will influence morbidity and mortality trends, L&A and health insurers show widespread indifference to climate risk, both in regard to their core business lines and their investment strategies. Only one of the 92 L&A companies — Prudential — earned a ‘leading’ rating.

• None of the health insurers earned a ‘leading’ rating and only one earned a ‘developing’ rating.

•Barely 10 percent of the insurers overall have issued public climate risk management statements articulating the company’s understanding of climate science and its implications for core underwriting and their vast investment portfolios.

The report includes specific recommendations for insurance companies, including:

•Develop climate risk oversight at the corporate board and top senior executive levels.

•Integrate climate change as a key ongoing risk into enterprise risk management frameworks.

•Issue comprehensive, public climate policies that articulate the firm’s understanding of climate science, underwriting and investment practices, and public engagement on climate issues.

•Improve climate change scenario and impact assessments by using climate-informed catastrophe models and climate scenario projection software, which can help in fine-tuning insurer product offerings and pricing.

•Boost public engagement on climate risks, including advocacy for investments in resilient public infrastructure, educating policyholders on climate mitigation and promoting climate-smart insurance products.

Useful website: www.ceres.org or follow on Twitter @CeresNews.