What’s the Climate Risk of your Insurance Company?

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Today on National Insurance Awareness Day, I am reflecting on last week when California Insurance Commissioner Dave Jones keynoted at the Environmental Entrepreneurs (E2) lunch meeting.

California has one of the largest insurance markets in the United States, and the sixth largest insurance market in the entire world. All of this adds up to $289 billion a year in insurance premiums that companies collect and over $7.5 trillion dollars in assets that these companies hold. Commissioner Jones is the leader of a multi-state effort that administers the National Association of Insurance Commissioners (NAIC) Climate Risk Disclosure Survey, and he launched the California Department of Insurance Climate Risk Carbon Initiative requiring the reporting of fossil-fuel investments held by insurance companies.

CA Insurance Commissioner Jones presenting at the Environmental Entrepreneurs meeting on June 20th

Commissioner Jones discussed NAIC Climate Risk Disclosure Survey with the E2 Group. This survey, consisting of questions that asses insurers responses to climate change, was developed in 2009 as a mandatory survey for large companies. Three years ago insurance regulators in California and five other states — Connecticut, Minnesota, New Mexico, New York and Washington — mandated completion of the survey by insurers writing in excess of $100 million in premiums.

At HIP Investor, we help everyday people understand a holistic picture of the future risk a company faces when making investment or purchasing choices. If an insurance company is not concerned about climate change, their investment portfolios could be facing future risk by ignoring the potential for climate risk to reduce returns to pay for their claims. If firms have high fossil-fuel exposure in their investments, the bottom line of the company could suffer. HIP Ratings can be a resource for investors and insurance consumers who are making these decisions, and a tool to empower people to evaluate these important issues.

Three steps to evaluate an insurance company on its future risk:

Check the financial strength of the company. The insurance company will provide their rating by 3rd party experts for free, but they tend to highlight the companies and areas that have higher scores. Be aware that each ratings company has it’s own rating scale. An A+ from S&P or Fitch is their 5th-highest rating, but an A+ from A.M. Best is the 2nd-highest rating, while Moody’s doesn’t have an A+ rating at all. Learn more about each ratings agency by checking out their website.

Check the answers to the NAIC Survey. Developed by Ceres, this scorecard ranks insurance companies according to 1) governance structures companies have instituted to address climate risk; 2) what climate risk management programs the insurers have in place at their enterprises; 3) how insurers are using catastrophe or other computer modeling tools to manage their climate risks; 4) how insurers are engaging with stakeholders on the topic; and 5) how companies are measuring and reducing greenhouse gas (GHG) emissions. Ceres also scored companies on the overall quality of their responses, and highlighted interesting survey response content. For example, MetLife also has specific board committees that oversee sustainability policies and corporate climate. Since 2003, MetLife has invested approximately $2.9 billion in solar and wind farms, and other renewable energy projects (as of December 31, 2014.) You can find the scorecard here. A sample of the rating of three of the largest insurance companies is below.

Berkshire Hathaway GroupMetropolitan Group (MetLife)UnitedHealth Group
Climate Risk GovernanceLOWHIGHMINIMAL
Enterprise wide Climate Risk ManagementLOWHIGHMINIMAL
Climate Modeling & AnalyticsMEDIUMHIGHMINIMAL
Stakeholder EngagementMEDIUMHIGHMINIMAL
Internal Greenhouse Gas ManagementMEDIUMHIGHHIGH
Climate Risk Disclosure & ReportingHIGHHIGHLOW
Overall RatingMEDIUMHIGHMINIMAL

Check the HIP Ratings of the insurers you are considering. HIP Investor rates the products and services, management practices and impact from operations of more than 6,000 companies. We consider more than 30 metrics that measure the impact corporations have on people and the planet, rolled up into a 0-100 score with the higher the number being the more impactful company. Summarized below are the ratings and results of the climate survey for these 3 large insurers.

Berkshire Hathaway GroupMetropolitan Group (MetLife)UnitedHealth Group
HEALTH134640
WEALTH06868
EARTH0827
EQUALITY176923
TRUST62914
MANAGEMENT PRACTICES367071
Overall HIP Rating306856

CONTACT US for a list of the HIP Ratings of the top 15 largest insurers in the United States to find out how your insurance provider stacks up.

#NationalInsuranceAwarenessDay

Megan Morrice
Follow Megan Morrice:

MBA, Series 65 Investment Adviser; Client and Partnership Development

Megan leads Client and Partnership Development at HIP Investor, where she identifies and creates partnerships with like-minded brands and educates clients on how HIP’s offerings can help them make more money and have a greater impact. Megan also is engaged with portfolio development and the publishing of the results of HIP partnerships. She has experienced firsthand the positive impact that companies have when investing where their values are. Her financial services background working as a Financial Advisor for Metlife and as a wholesaler for Leisure, Werden & Terry Agency allowed her to work with clients and understand the internal challenges faced in the financial services industry. In 2015, she did a fellowship at Confluence Philanthropy, an international network that helps move philanthropic capital in the direction of mission-aligned investing. She holds an MBA in Sustainable Management from Presidio Graduate School. Megan is passionate about helping individuals and organizations understand their financial options, align their money with their values, and create financial products that best serve the needs of people.

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