Insurance companies are continuing to fuel the climate emergency — 50 years after the first warning about the impact of climate change, a new report claims.

The Insure Our Future campaign has released its seventh annual scorecard on insurers’ climate policies.

The scorecard says that owing to the growing frequency and severity of floods, hurricanes, wildfires, droughts and other climate-related disasters, insurance payouts for natural catastrophes have increased to an average $110 billion a year since 2017, more than twice the average over the previous five years.

It said Insuramore, a market intelligence firm in the insurance sector, reports fossil fuel insurance earned the industry about $21.25 billion in 2022.

Peter Bosshard, global co-ordinator of the Insure Our Future campaign, said: “The insurance industry first warned about climate risks in 1973, and these have now become a grim reality, particularly for low-income countries and communities which have contributed least to the climate emergency.”

Download PDF File

IOF Scorecard 2023 embargoed final.pdf

He claimed: “Insurance companies are now abandoning customers affected by climate risks, yet they continue to fuel the climate crisis by underwriting and investing in the expansion of fossil fuels.

“If insurance companies took climate science seriously, they would fully align their underwriting and investment strategies with a credible 1.5C pathway and end all support for increased fossil fuel production. ”

The Insure Our Future scorecard says that insurers are now seeking to limit their future losses from climate risks, adding that according to a briefing on natural catastrophes by the Swiss Re Institute, capital for reinsurance fell by 20 to 25 per cent in 2022 and combined with growing financial risk, caused a spike in premiums.

Ariel Le Bourdonnec, an insurance analyst at Reclaim Finance, said: “Insurers talk a lot about their climate commitments and supporting their clients through the energy transition, but this is plain greenwashing.

“They are still profiting from providing cover that allows companies to develop new fossil fuel projects. Insurers could be a force for change, but instead they are undermining climate action.”

Insurers have continued to introduce restrictions on coal, and although progress has slowed, coal companies are finding it ever harder to get insurance for new projects and, increasingly, for existing operations, the scorecard said.

It said that Insuramore calculated that insurance companies with a 41.2 per cent share of the commercial property and casualty market and a 62.7 per cent share of the reinsurance market have now taken action, up from 39.8 per cent and 58.2 per cent respectively in 2022.

Far fewer insurers have introduced policies on oil and gas, and restrictions are much more limited than on coal.

Companies with a 19.6 per cent share of the commercial property and casualty market and 46.7 per cent share of the reinsurance market have taken action, up from 15.4 per cent and 43.4 per cent, according to Insuramore.

The scorecard says: “Insurers talk a lot about the need for oil and gas companies to transition away from fossil fuels. In reality, they are not advocating for a transition away from fossil fuel extraction but are satisfied if fossil fuel companies adopt shallow net zero commitments, shift from coal to gas extraction, invest in renewable energy projects and reduce their operational emissions.

“This does nothing to reduce the climate impact of burning the oil and gas these companies sell, which is by far the biggest part of their life-cycle emissions.”

Under the EU’s draft Solvency II rules, insurers will need to publish transition plans with quantifiable targets and processes for reaching net zero by 2050.

In the United States, the Senate budget committee has launched an investigation into how the industry evaluates climate risks and pressed insurers to disclose their cover for and investments in fossil fuels, the report said.

In the scorecard, Insure Our Future calls on the International Association of Insurance Supervisors to create a process for regulating the alignment of insurance underwriting with climate science, including a mandatory requirement for science-based transition plans.

It also noted that on November 28 and 29, on the eve of the COP28 climate summit, insurance company CEOs will gather in Zurich to celebrate the 50th anniversary of the Geneva Association, the industry’s think-tank, and to discuss the role of insurers in accelerating the world’s decarbonisation.

“These CEOs have been aware of the risks which climate change poses to global society throughout their professional careers. They are in a powerful position to support and accelerate the global transition from fossil fuels to clean technologies,” says the scorecard.

“A scorched, uninsurable world is a world without an insurance industry and so insurance companies have an eminent self-interest in scaling up their climate action. Insurers have demonstrated that they can accelerate the shift away from fossil fuels through their coal exit policies. They urgently need to adopt similar policies on oil and gas.”

• The full scorecard report can be found in Related Media