The Financial Service Industry And Climate Change: Insurance And Reinsurance

• Author: Cari Shiffman
• Position: J.D. candidate, May 2007, at American University, Washington College of Law
• Pages: 05

Page 12

At the United Nations Institutional Investor Summit on Climate Risk on November 21, 2003, institutional investors representing over $1 trillion in invested capital met to address the financial risks of global climate change.¹ The discussions included the projected economic impacts of climate change and the possible actions that investors could take in order to address this risk in their portfolios.² Harvard University Professor John Holdren, speaking to the group on the science of climate change, stressed that climate change is "the most dangerous of all the environmental problems caused by human activity."³ Participants at the summit called on institutional investors and the U.S. Securities and Exchange Commission to take action to understand and mitigate investor climate risk by requiring disclosure and independent analyses of climate risk.4

Climate change is considered to be of particular strategic business importance to insurance and reinsurance companies.⁵ As climate change poses an increasing threat to human health, life and health insurance companies may begin to see a rise in demand for their services.⁶ While very few insurers have yet factored in climate change-related risks when underwriting premiums and deductibles,⁷ reinsurers have initiated qualitative sector- level impact analyses.⁸ Financial institutions and the financial services industry, including insurers and reinsurers, will likely continue to see a greater role in addressing the impacts of climate change.⁹

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ENDNOTES:

[1] United Nations, Institutional Investor Summit on Climate Risk, available at http://www.incr.com/summit_summary_report.pdf (last visited Mar. 28, 2005).

[2] Id.

[3] Id.

[4] Id.

[5] United Nations Environmental Programme ("UNEP"), CEO Briefing on Climate Change tbl. 1, available at http://www.unepfi.org/fileadmin/documents/CEO_briefing_climate_change_2002_en.pdf (last visited Mar. 28, 2005).

[6] Id.

[7] Id.

[8] Id.

[9] UNEP, supra note 5.