Regulators Should Identify and Mitigate Climate Risks in the Insurance Industry
The insurance industry plays a critical role in both the financial system and the economy overall, with U.S. insurance companies writing approximately $1.5 trillion in premiums and holding trillions of dollars more in assets on their balance sheets.1 By underwriting the risks of millions of individuals, businesses, and public entities, the insurance industry provides an essential service as a backstop after unfortunate events. At the same time, by investing the premiums they hold, insurance companies are major institutional investors and thus have significant influence in financial markets.
As is the case with many businesses, insurance companies face risks due to the worsening effects of global climate change. According to the International Association of Insurance Supervisors (IAIS), “[b]ecause of the dynamic, complex and global impacts of climate risk across the economy and society, it is likely that all insurance businesses will be directly or indirectly affected over the long-term—regardless of their size, business line, domicile or geographic reach.”2
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