Climate Risk Disclosure & Insurance:
Communicating Risks, Communicating Actions
Max Messervy,
Manager, Insurance Program
Ceres
Chapel Hill, NC
March 20, 2015
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Presentation Overview
1. Introduction to Ceres
2. Insurer Climate Risk Disclosure Survey
3. Climate Risk Management Communication
4. Closing Perspective
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A Record Winter In Record Time
2
Mobilize Business & Investor Leadership
to Build a Thriving, Sustainable Global Economy
The Ceres Coali3on Investor Network More than 130 organiza2ons, including environmental experts, public interest groups and investors. Over 100 members currently represen2ng more than $13 trillion AUM Company Network More than 75 members in over 20 different economic sectors 3
NAIC Climate Change Involvement
Major Milestones
NAIC Climate
Change and Global
Warming Task
Force (1st meeting
summer 2006)
NAIC adopted the
Insurer Climate Risk
Disclosure Survey
(2009)
NAIC released The
Potential Impact of
Climate Change on
Insurance Regulation
(2008)
2005
Revisions to the NAIC
2013 Financial
Condition Examiners
Handbook (2012)
Survey became
a multi-state
initiative: CA, NY,
PA, WA (2010)
2010
Briefings for
Financial Examiners
on climate change
(2015)
Ceres issues Climate Risk
Disclosure Survey Reports for 2010,
2011 and 2012 reporting years
Source: NAIC, The Center for Insurance Policy & Research, November 24, 2014.
Municipalities
Associations,
2015
etc.
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Insurer Climate Risk Disclosure
Survey Evolution
Reporting Thresholds:
•  2010: >$500M DPW
400
330
300
Number of
Insurance
Groups
200
Reporting
100
0
•  2011: >$300M DPW
•  2012: >$100M DPW
184
State Participation:
88
•  2012 included CA,
NY, WA, CT & MN
2010
•  2013 reporting year
“new” states IL, MD
& NM
2011
2012
Insurer Climate Risk Disclosure Survey
Reporting Year
Source: Ceres analysis of Insurer Climate Risk Disclosure Survey data for reporting years 2010, 2011 and 2012.
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Ceres Insurer Climate Risk Disclosure Report
and Scorecard:
2014 Findings and Recommendations
•  Ceres’ report is based on Climate Risk Disclosure Survey for
reporting year 2012
•  (Re) Insurers included in Survey:
o  87% of the total US insurance market (DPW)*
o  (Re) Insurers in CA, NY, WA, CT, and MN
o  Companies with $100M+ direct premiums written
Sources: US Treasury, Annual Report on the Insurance Industry, June 2013; A.M. Best and NAIC company data.
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Ceres’ Evaluative Approach
Six Climate Risk Management Themes
1
Climate Risk Governance
2
Enterprise-Wide Climate Risk Management
3
Climate Change Modeling & Analytics
4
Stakeholder Engagement
5
Internal Greenhouse Gas Management
6
Quality of Climate Risk Disclosure
Climate Risk Management Ratings Hierarchy
•  Top Quartile = Leading Practices
•  2nd Quartile = Developing Practices
•  3rd Quartile = Beginning Practices
•  Lowest Quartile = Minimal Information
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Climate Risk Disclosure & Insurer Size:
2012 Median Direct Premiums Written
$430M
$1B
$1.3B
$5B
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Percentage of Total 2012 US Direct Premiums
Written (Total = $1.14T)
24%
28%
24%
10%
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P&C Climate Change
Modeling and Analytics
Leading Practices
•  Integrate data from
multiple sources
•  Run stress tests with
conservative risk
predictions
•  Employ cat models
that project up to/
past five years
Zurich maintains a sophisticated mathematical National Catastrophe Model to
understand the aggregate risk at the Group level. It includes climate-related perils,
such as tropical cyclones, extra-tropical cyclones, floods and severe convective
storms. The model is not purely relying on a single model vendor…but has the
flexibility to use any vendor model's output and implement proprietary
adjustments to both the severity and frequency of events to reflect the 'Zurich
View' of risk. Zurich aims to understand the assumptions in the models, gain a
multi-model view, compare to claims experience and use internal and external
insight.
Zurich monitors emerging climate research through internal expertise and
gains external insight through the Natural Catastrophe Advisory Council,
which is made up of world-class scientists, including an author from the
Intergovernmental Panel on Climate Change.
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“Since 2007, a Group-level business unit "Allianz Climate Solutions" that
houses significant climate risk related expertise has been guiding adjustments
to Group Risk Policies and Standards that govern worldwide businesses, as
well as Group investment strategies.
“This unit also provides technical and other expertise that Allianz’s U.S.
businesses and other worldwide operating entities can draw upon as they
respond to climate risk issues via product development, risk management,
investment considerations, etc.”
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Revisions to the NAIC 2013 Financial
Condition Examiners Handbook
(adopted December 2012)
•  In 2012, state insurance regulators, working through the NAIC,
adopted revisions to the 2013 Financial Condition Examiners
Handbook (FCEH).
•  The updates provide examiners with guidance on what questions to
ask insurers regarding the potential impact of climate change on
solvency.
•  The questions were designed to help identify unmitigated risks and
to provide a framework for examining such risks and their impact
on how an insurer invests its assets and prices its products.
•  Ceres and Rector & Associates conducted climate risk briefings for
financial examiners and analysts in California and Washington
State in early 2015 – strong feedback received.
Source: NAIC, The Center for Insurance Policy & Research, November 24, 2014.
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Underwriting: Gather Information
Examination Phase 1
•
Types and amounts of policies written
•
ERM practices related to climate change risk
•
Corporate culture related to climate change risk
•
Interviews about integration of climate change risk into underwriting
and pricing
o  Chief Underwriting Officer/Manager
o  Chief Pricing Actuary
•
Interview with appropriate Board of Director member regarding
Board’s involvement in climate change
•
Underwriting results (Financial Statements)
•
Actuarial Opinion & Report
•
Business plan
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Closing Considerations
•
At least some insurers are taking more action on climate risk than
reported in the Climate Risk Disclosure Survey
•
A key question is – who within the insurance company’s senior
management should be responsible for the quality of climate risk
disclosure?
•
Public reporting remains important for multiple (re) insurance
stakeholders:
–  Consumers
–  Regulators
–  Investors
•
Regulatory oversight and assessment of (re) insurer climate risks are
crucial for securing the future insurability of exposed areas.
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Thank You
Max Messervy
Manager, Insurance Program
Ceres
messervy@ceres.org
617-247-0700 x 126
@MaxMesservy
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