From Risk to Opportunity 2012: The Greening of Insurance

Mills, E. 2012. "The Greening of Insurance," Science 338, 1424, December 14.
Agricultural workers in a field; a tornado and lightning stirke.


Every sector of the economy telegraphs climate risks to its insurers. In turn, climate change stands as a stress test for insurance, the world’s largest industry, with U.S. $4.6 trillion in revenues, 7% of the global economy. Insurers first publicly voiced concern about human-induced climate change four decades ago.

Increasingly, multifaceted weather- and climate-related insurance losses involve property damage, business disruptions, health impacts, and legal claims against polluters. Worldwide, insured claims that were paid for weather catastrophes average $50 billion/ year (about 40% of total direct insured and uninsured costs); they have more than doubled each decade since the 1980s, adjusted for inflation. Insurers must also tackle risks emerging from society’s responses to climate change, including how structures are built and energy is produced.

Where there are risks, there are also opportunities. This article describes industry trends, activities, and promising avenues for future effort.Insurers are now supporting climate research, developing climate-responsive products and services, raising awareness of climate change, reducing in-house emissions, quantifying and disclosing climate risks, incorporating climate change into investment decisions, and engaging in public policy. As of late 2012, a total of 1148 initiatives have emerged (largely in the past decade) from 378 entities in 51 countries, representing $2 trillion (44%) of industry revenues.

The insurance sector is a global clearinghouse for climate risks that affect every underwriting area and investment. Where insurers recoil in the face of climate change, consumers will encounter acute affordability issues accompanied by huge holes in this societal safety net. But insurers’ efforts to date demonstrate that market-based mechanisms can support greenhouse-gas emission reductions and adaptation to otherwise unavoidable impacts.