Conclusion

Insurance companies and the regulators that supervise their work are only beginning to exercise the industry’s financial, analytic, and norm-setting power to address the threat of climate change. However, top performing regulatory jurisdictions such as California offer a compelling vision of what could be accomplished if best practices were adopted more uniformly across the sector.

Unlike many other industries, where responsible regulatory action to address climate change may come at the expense of short-term profits and create a moral hazard for executives, leaders in the insurance industry have a powerful, increasingly urgent financial incentive to act in favor of sustainability. The 10 principles outlined in this report provide regulators with a roadmap they can use to seize this opportunity. Prudent action by insurance supervisors to address non-traditional risks will not only lead to better outcomes for insurance firms, but also have the potential to spur more responsible behavior across the broader economy.

In the past, insurance has been viewed primarily as a tool for managing risk. In the case of climate change, the industry and its regulators could use their influence to actually mitigate the risk itself. This approach, if applied in response to other non-traditional environmental, social, and governance risks, could transform the industry — and enable regulators to help foster a more stable, sustainable, and prosperous world on behalf of the citizens they serve.