Newspaper article The Christian Science Monitor

New Combatant against Global Warming: Insurance Industry ; the World's Second-Largest Industry, Worried about Losses Related to Climate Change, Offers Incentives to 'Go Green.'

Newspaper article The Christian Science Monitor

New Combatant against Global Warming: Insurance Industry ; the World's Second-Largest Industry, Worried about Losses Related to Climate Change, Offers Incentives to 'Go Green.'

Article excerpt

Insurance companies, who like to stay out of the limelight, are becoming leading business protagonists in the assault on global warming.

* 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 climate change.

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.

Reassessing risk

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 firms.

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. …

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