7.4.19
A recent Moody’s report pressured insurers to address environmental, social, and governance (ESG) risk, warning that some companies would struggle to meet their financial obligations without making significant adjustments to their asset portfolios.
Recent natural disasters – including Gulf Coast hurricanes, European heatwaves, and California wildfires – are responsible for hundreds of billions of dollars in damages annually. Property and casualty insurance are powerfully impacted by severe weather trends, and credit rating agencies are aware of the sector’s looming vulnerabilities.
Weather shocks are threatening to significantly raise underwriting costs for insurers. Industry experts are concerned that many major insurance companies’ portfolios hold risky assets; they could see declining value in correspondence with the climate crisis.
The report detailed $10 trillion in outstanding fossil fuel assets that could become “stranded” as environmental regulations and clean energy alternatives render those investments economically unviable. Insurers oversee a substantial portion of these increasingly risky assets.
In a recent announcement, Chubb Limited, a global insurance provider, became the first major insurer to cease future business with coal companies. In addition to environmental risk, life insurance groups face significant social concerns. The US opioid crisis introduces further uncertainty into predictions of future claims.
Though Moody’s report marked their uniquely strong support for ESG considerations, other rating agencies have issued similar concerns. Fitch announced its plans to publish information on ESG factors’ influence on individual credit-rating decisions. S&P Global began offering company-specific ESG reports to insurers in April.
Read More via the Financial Times