From Risk to Opportunity Insurer Responses to Climate Change 2008

From Risk to Opportunity Insurer Responses to Climate Change 2008 Evan Mills, Ph.D. April 2009 A Ceres Report This annual report was commissioned by Ceres, a national coalition of investors, environmental groups, and other public interest organizations working with companies to address sustainability challenges such as climate change. Ceres also directs the Investor Network on Climate Risk, a group of 78 institutional investors from the U.S., Europe, and Canada who collectively manage over $7 trillion in assets. This project was sponsored by grants from Blue Moon Fund, The Kresge Foundation, The Pew Charitable Trusts, Rockefeller Brothers Fund, and Rockefeller Family Fund. The original compilation of case studies was performed by Lawrence Berkeley National Laboratory, and sponsored by the U.S. Department of Energy and the U.S. Environmental Protection Agency. The views expressed in this report are the author’s and do not necessarily reflect those of the sponsors. http://www.ceres.org About the Author Dr. Evan Mills is a Staff Scientist at the U.S. Department of Energy’s Lawrence Berkeley National Laboratory, one of the world’s leading research centers on energy and environment, and research affiliate with the Energy and Resources Group at the University of California at Berkeley. Dr. Mills works in the areas of energy management and the impacts of climate change on economic systems, particularly with respect to the insurance sector. He has published more than 200 technical articles and reports and has contributed to 10 books, including the U.S. Climate Change Science Program’s forthcoming national assessment regarding climate change impacts. He served as co-leader of the Intergovernmental Panel on Climate Change (IPCC) Third Assessment Report’s chapter on insurance, under the auspices of the United Nations, and contributed to the Fourth Assessment released in 2007. IPCC scientists shared the 2007 Nobel Peace Prize with former Vice President Albert Gore. Dr. Mills’s insurance-related research is collected at http://insurance.lbl.gov For a downloadable version of this report, errata, the most current repository of information on insurance company activities in response to climate change, and to submit new initiatives for consideration in future reports, see: http://insurance.lbl.gov/ opportunities.html About the cover: The imagery invokes the sources of human-induced climate change, the diversity of consequences on land and sea, and impacts spanning financial systems and human settlements. In this simulation of the Battery area of lower Manhattan (NECIA/UCS, 2007, Image generated by Applied Science Associates, Inc.), the light-blue area depicts today’s FEMA 100-year flood zone for the city (a 1% chance of flooding in any given year). With additional sea-level rise by 2100 under a higher-emissions scenario, this area is projected to to have a 10% chance of flooding in any given year; under a lower-emissions scenario, a 5 % chance of flooding in any given year. From Risk to Opportunity Insurer Responses to Climate Change Evan Mills, Ph.D. April 2009 A Ceres Report From Risk to Opportunity: 2008 – Insurer Responses to Climate Change Table of Contents Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .i Foreword. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 I. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Taking the Temperature of the Insurance Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Climate Change as the Ultimate Enterprise Risk Management Challenge . . . . . . . . . . 9 Global (Business) Climate Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 From Risk to Opportunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 II. Advancing Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Understanding The Climate Change Problem. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 Analyzing Loss Drivers and Assessing Vulnerabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Integrating Climate Change into Traditional Catastrophe Modeling . . . . . . . . . . . . . . . 17 Promoting Loss Prevention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 Traditional Risk Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Improving Land-Use Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Integrating Energy Management & Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . 22 Better Management of Forestry, Agriculture, and Wetlands . . . . . . . . . . . . . . . . . . . . . 22 ‘Rebuilding Right’ Following Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Performing Research on Green Technologies and Climate Change Solutions . . . . . . 23 Aligning Terms and Conditions with Risk-Reducing Behavior. . . . . . . . . . . . . . . . . . . . .24 Pay-as-You-Drive Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Assigning Directors & Officers Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Recognizing and Rewarding Correlations Between Sustainable Practices and a Low-Risk Profile. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Crafting Innovative Insurance Products & Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29 New Insurance Products for Energy Service Providers. . . . . . . . . . . . . . . . . . . . . . . . . 29 Energy-Savings Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Renewable-Energy Project Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Green-Buildings & Equipment Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Warranty and Service Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Microinsurance and Other Initiatives for the Developing World . . . . . . . . . . . . . . . . . . 36 Offering Carbon Risk-Management and Carbon-Reduction Services . . . . . . . . . . . . . . .38 Climate Risk-Management Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Carbon Trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Managing Risk for Clean Development Mechanism (CDM) and Carbon-Offset Projects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Enabling Customers to Acquire Carbon Offsets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Financing Climate-Protection Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42 Preferential Lending Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Targeted Lending. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 From Risk to Opportunity: 2008 – Insurer Responses to Climate Change Direct Investment in Climate Change Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43 Sustainable Asset Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Green Buildings Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Investing in Carbon Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Building Awareness and Participating in the Formulation of Public Policy . . . . . . . . .47 Information and Education. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Participating in the Formulation of Public Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Endorsing Voluntary Energy-Saving Policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Promoting Energy-Efficiency Codes and Standards. . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Leading by Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51 Corporate Social Responsibility Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 In-House Energy & Carbon Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Climate Risk Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56 Disclosure to Regulatory Agencies: the U.S. Securities and Exchange Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Disclosure to Investors: The Carbon Disclosure Project . . . . . . . . . . . . . . . . . . . . . . . . 57 Other Climate-Risk Disclosure Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 III. Climate Change Liability: Emerging Risks, Emerging Opportunities. . . . . . . . . . . .59 IV. The Intrinsic Role of Regulators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64 V. Toward Best Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66 Getting Started . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68 Outlook. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70 Appendix A: Summary of Database . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .72 Appendix B: CDP Responses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80 References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .82 ... - tailieumienphi.vn