Allianz is the world\u2019s largest insurer, with operations in 70 countries and tens of millions of clients worldwide. The company exists to provide households and businesses with financial protection against major risks. Climate change stands to increase the frequency and intensity of high-impact events, and as such, is massively impacting Allianz and the industry. Whether Allianz can continue to weather this storm depends on its ability to leverage all its business lines toward risk reduction.<\/p>\n
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Climate change and insurers<\/u><\/strong><\/p>\n Allianz provides property, casualty, and liability insurance. Although it is impossible to disentangle the \u201ccause\u201d of individual weather events[i]<\/a>, trends associated with climate change have likely disrupted and will likely continue to affect[ii]<\/a> every segment of the business:<\/p>\n Almost a decade ago, Allianz projected that climate change \u201cstands to increase insured losses from extreme events in an average year by 37 percent within just a decade.\u201d[iii]<\/a> Some estimate that climate-related losses in a bad year in the U.S. could top $1 trillion; Allstate claimed that losses from Gulf Coast hurricanes in the last decade wiped out 75 years worth of profits.[iv]<\/a> Going forward, although it is almost impossible to predict the magnitude of potential losses, it is clear that that the increased risks will be substantial.<\/p>\n <\/p>\n What is Allianz doing? <\/u><\/strong><\/p>\n Among the first companies to recognize environmental risks and lobby governments for action, insurers have also been among the first to cut back on business due to climate change, reducing coverage in high-risk areas. Others have raised prices, but doing so\u2014to a level commensurate with actual risks\u2014has made their products unaffordable, shifting the burden to cheaper government programs and thus distorting the market away from developing real adaptive solutions.<\/p>\n The Financial Stability Board and national financial regulators have forced insurers to consider climate risks. The aftermath of Hurricane Katrina led to an increase in the capital adequacy ratio insurers like Allianz must maintain, guaranteeing they can withstand losses associated with a 250-year event (rather than a 100-year event), and that they can withstand two such events in quick succession.[v]<\/a> These changes have helped bring upfront some future costs, but have not forced enough action on the risk-mitigation front for end consumers.<\/p>\n Allianz Climate Solutions was established to consolidate climate change-related work. It insures renewable energy technologies, mitigating the risk that renewable projects will not generate expected energy. It also incubates climate-related projects across other businesses. The company has released a Climate Strategy regularly since 2005, with the 2014 version focusing on the role the company can play in reducing carbon emissions through its own operations, investments, and financial service activities.[vi]<\/a> Ceres, a leading sustainability nonprofit, has recognized the company for its innovative solutions and its disclosures of climate-related risks, including elevation of climate discussions to the board room.[vii]<\/a><\/p>\n <\/p>\n The opportunity for Allianz <\/u><\/strong><\/p>\n Insurers like Allianz have the opportunity not only to promote greenhouse gas reduction, but also to promote risk-reduction measures that benefit both clients and the bottom line. Just as the industry led in addressing risks associated with fires and earthquakes decades ago, Allianz must develop new tools to address increased losses from climate-related events, including:<\/p>\n <\/p>\n While these programs may seem small, insurance companies have long relied on the ability to use their products to promote risk-reducing behaviors. Allianz has taken great strides to mitigate climate change by insuring potentially risky green technologies, and has strengthened its balance sheet to prevent climate-related losses from becoming a financial stability risk. Now, rather than limit exposure to risky areas and groups, it should harness its ability to promote good behaviors in order to help vulnerable populations without breaking its customer promise.<\/p>\n <\/p>\n [i]<\/a> Jay Guin, \u201cDoes Climate Change Matter to the Insurance Industry?\u201d AIR Worldwide, 4 February 2016, <http:\/\/www.air-worldwide.com\/Blog\/Does-Climate-Change-Matter-to-the-Insurance-Industry-\/><\/p>\n [ii]<\/a> Don Pittis, \u201cAs Climate Change claims heat up, insurance industry says we need to adapt,\u201d CBC News, 12 May 2016, <http:\/\/www.cbc.ca\/news\/business\/fort-mac-climate-insurance-1.3576918><\/p>\n [iii]<\/a> Allianz, \u201cQuality Matters: Evaluating the quality of insurance carriers in the oil and gas sector,\u201d 2013. <http:\/\/www.agcs.allianz.com\/assets\/PDFs\/Special%20and%20stand-alone%20articles\/Energy%20Whitepaper-%20%20Quality%20Matters.pdf><\/p>\n [iv]<\/a> Evan Mills, \u201cResponding to Climate Change: The insurance industry perspective,\u201d Climate Action Programme,<\/em> 2009. <http:\/\/evanmills.lbl.gov\/pubs\/pdf\/climate-action-insurance.pdf><\/p>\n [v]<\/a> Insurance Information Institute, \u201cClimate Change: Insurance Issues,\u201d September 2014, <http:\/\/www.iii.org\/issue-update\/climate-change-insurance-issues><\/p>\n [vi]<\/a> Allianz Group, \u201cClimate Change Strategy,\u201d 2014, <http:\/\/acs.allianz.com\/files\/6014\/1570\/1222\/0314_allianzclimatechangestrategy_eng.pdf><\/p>\n [vii]<\/a> Max Messervy and Cynthia McHale, \u201cInsurer Climate Risk Disclosure Survey Report & Scorecard: 2016 Findings and Recommendations,\u201d Ceres, October 2016 <https:\/\/www.ceres.org\/resources\/reports\/2016-insurer-climate-risk-disclosure-survey\/view><\/p>\n <\/p>\n\n
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