Insurance companies, who like to stay out of the limelight, are
becoming leading business protagonists in the assault on global
* Next week, Travelers, the giant insurance firm, will offer
owners of hybrid cars in California a 10 percent discount. It
already offers the discount in 41 other states and has cornered a
large share of the market.
* This fall, Fireman's Fund will cut premiums for "green"
buildings that save energy and emit fewer greenhouse gases. When it
pays off claims, it will direct customers to environmentally
friendly products to replace roofs, windows, and water heaters.
* In January, Marsh, the largest insurance broker in the US, will
offer a program with Yale University to teach corporate board
members about their fiduciary responsibility to manage exposure to
The insurance industry's clout is sizable. It's the second-
largest industry in the world in terms of assets, and has a direct
link to most homeowners and businesses. It insures coal-fired power
plants as well as wind farms, so it can influence the power
industry's cost structure. With its financial muscle, the industry
could help advance the use of new financial instruments designed to
allow companies to trade greenhouse-gas emissions in the same way
that commodities are bought and sold.
"The insurance industry has the ability to change behavior,
policies and communicate with clients," says Nancy Skinner, US
director of the Climate Group, which lobbies for business and
government action to address global warming.
Some consumers are already noticing a negative effect of this
shift. In the past year, some 600,000 homeowners living in a zone
that an insurer considers a high storm risk in an era of climate
change have seen their policies cancelled or not renewed. This
includes coastal areas stretching from Texas to New York. Currently,
coastal properties are valued at $7.2 trillion.
One reason for this massive change in coverage is an ongoing
shift in the way insurance companies view risk. Insurers are
starting to change their risk-assessment models to reflect future
climate-change scenarios instead of past weather patterns.
"Climate change represents an ever- increasing risk, a risk far
too great to ignore," says Clement Booth, a member of the Board of
Management at Allianz AG, one of the world's largest insurance
This week, Allianz, in cooperation with the World Wildlife Fund,
issued a report on steps the insurance industry could take to reduce
the physical impact of global warming or to help society adapt.
"The industry is in a unique position to incentivize," says
Miranda Anderson, an author of the report and a vice president at
David Gardiner & Associates. "This is the very beginning of thinking
through this issue."
In fact, the industry is not driven just by an attempt to help
the environment: It also wants to make money. …