The US insurance sector held $536 billion in fossil-fuel related assets based on the most recent available dataset, according to a new report.
The report, Changing Climate for the Insurance Sector, conducted by Ceres, ERM, and Persefoni, reveals that the top 16 US insurers alone held more than 50% of the half trillion dollars in fossil fuel-related assets owned by the sector.
The quantitative analysis was undertaken using US insurers’ 2019 assets compiled by the California Department of Insurance, which it says is the most complete and recent dataset currently available.
The analysis comes as some insurers are currently moving to curtail catastrophe-related risk, with a growing number ceasing to offer certain policies in some locations. This includes State Farm’s May 2023 decision to stop offering new home insurance policies in California due to wildfire risk, Farmers’ July 2023 announcement that it will stop renewing almost a third of the policies the company has written in Florida, and close to 20 home insurers in hurricane-prone Louisiana either pulling out of the state or declaring insolvency.
Tom Reichert, Group CEO of ERM, said: “As the climate crisis intensifies, the insurance industry is finding itself uniquely exposed to climate-related challenges. Now is the time for insurers to take action to address these risks and opportunities related to their investments and underwriting. This will help to ensure their business models remain resilient and that they can continue to serve their customers effectively, while ultimately accelerating the transition to a low-carbon economy.”
Kentaro Kawamori, CEO and Co-founder of Persefoni, said: “This research once again emphasises that climate risk is financial risk. Insurance companies must continue to evaluate their financed emissions and measure the impact they have through their fossil fuel-related assets. The technology to do this exists and will help the transition to a global decarbonised economy without penalising businesses and consumers.”
Mindy Lubber, CEO and president of the sustainability nonprofit Ceres said: “Insurance companies are facing increasing climate change risks as the frequency and severity of extreme weather events, such as hurricanes, floods, and wildfires escalate. This report reveals the urgent need for insurers to address the financial risks of climate change posed by their fossil fuel holdings and take advantage of opportunities to accelerate the transition of their investment portfolios to a clean energy future.”
The report also reveals that the top two US property and casualty companies, Berkshire Hathaway and State Farm Insurance, owned 44% of total fossil fuel-related assets owned by the entire sector. Asset ownership among life insurance companies was more broadly distributed, with the top two life insurance companies, TIAA Family Group and New York Life, owning 14 percent of assets owned by companies in that sector.
This research is based on quantitative analysis of US insurance sector investments in fossil fuel and green bonds and the ways that insurers’ approaches to fossil fuel exposure in investments and underwriting has evolved over the past five years. It was undertaken using data captured in a California Department of Insurance (CDI) database of US insurance companies operating in California, which covers the most recent years of data available (2018/19) and was released in 2022. As insurers reporting to the CDI database comprise 77% of all insurers operating in the US, the dataset is broadly representative of the overall US insurance sector.