WWF and insurance company tackle climate change in the US
The report, Climate Change and Insurance: An Agenda for Action in the United States, examines the latest scientific findings about climate change, including the impacts of forest fires, storms and floods, and the potential impact on the insurance industry and its customers.
“Global warming is the greatest environmental threat facing the world, and the people and animals that inhabit it," says Carter Roberts, President and CEO of WWF-US.
"The cost of doing nothing carries a price tag none of us can afford," he added. "The insurance industry has a vested interest in stepping up to the plate and being a part of the solution. Allianz has been a leader on this issue and we hope that the entire industry makes climate change a top priority.”
According to the report, climate change has the potential to significantly alter and intensify destructive weather patterns in the United States, leading to increased flooding, forest fires and storm damage. The most direct risk to the US will likely come from hurricanes, which are expected to become more frequent and powerful.
Additionally, rising sea levels over the coming decades could inundate many US coastal cities and portions of some coastal states. Forest fires could become even more frequent and larger. These changes could make insurance unaffordable for customers in high-risk areas. In fact, insurance premiums in states vulnerable to hurricanes are already increasing, and in some cases, insurers are exiting these markets altogether.
Allianz and WWF intend to engage the insurance industry, governments, regulators and others to better manage the risks associated with climate change.
“We need to better understand the effects of climate change and the changing environment for our customers,” says Clem Booth, member of the Board of Allianz AG, “but if we can find a way to provide insurance in the face of major changes, from the first transatlantic voyages to global terrorism, then we can find new ways to address climate change.”
One key recommendation for addressing the potentially adverse consequences of climate change in the US is for both governments and insurance companies to help correct market distortions and communicate appropriate signals to homeowners, businesses and consumers moving into high risk areas. The report points to the need by regulators to consider carefully the impact of programmes, like the National Flood Insurance Programme, which keep insurance rates artificially low. By masking the real price of risk, such policies encourage overdevelopment in high risk areas.
In addition, the report suggests US insurers begin incorporating future potential climate change impacts, such as continued sea-level rise and longer fire seasons into planning, rather than relying only on historical data of past weather events.
The report also recommends that insurers influence land-use development and planning in high risk areas. For example, conserving coastal mangroves provides a natural buffer from storms, surges and waves, while forest preservation can reduce mudslides.
Another way to minimize losses related to climate change is to promote storm-resistant and energy-efficient building materials, improved building codes, and better public education about their benefits.
“This emphasizes the win-win opportunity for customers presented by energy-efficient buildings that also incorporate state-of-the-art protection against wind damage, fire and water influx,” added Booth.
Fireman's Fund Insurance Company, a unit of Allianz AG (Charts), this Fall plans to introduce commercial insurance policies designed to support and encourage the development of "green" buildings that save energy and reduce emissions of greenhouse gases. One of the products will provide a discount to LEED (Leadership in Energy and Environmental Design) or Green Globes certified buildings.
A second commercial property product will upgrade customers to energy efficient or “green” products when replacing damaged items such as roofs, windows, equipment, lighting systems and hot water heaters. And, a third product will provide commissioning coverage to inspect systems such as HVAC after installation for proper installation and efficiency.
“Our new products will promote energy efficiency, resulting in a reduction of greenhouse gas pollution as well as cost savings for our customers," said Chuck Kavitsky, Chief Executive Officer of Fireman’s Fund.
"Energy-efficient construction can also help make buildings and homes more resilient, while double pane windows are less likely to shatter during fires. A lot of building owners are concerned about climate change but don’t know what to do. Here’s one thing building owners can do that addresses more than their bottom line.”
In line with the report’s recommendations, Allianz is taking several actions to help develop solutions for its customers and the industry as a whole. These include investing $600 million in renewable energy projects over the next five years, introducing a new tool based on Google Earth in the US to help customers better manage their exposure to natural catastrophes, and cutting its own greenhouse gas emission by 20 per cent by 2012. Allianz is also planning to begin developing new products that address global warming and will start researching ways to integrate the anticipated potential future impacts of climate change into its risk models.
• Allianz Group is one of the world's leading insurers and financial services providers, present in more than 70 countries with over 177,000 employees. At the top of the international group is the holding company, Allianz AG, with its head office in Munich, Germany. The Allianz Group provides its more than 60 million customers worldwide with a comprehensive range of services in the areas of property and casualty insurance, life and health insurance, and asset management and banking. In fiscal year 2005, Allianz's total revenues amounted to some €100.9 billion. At the end of 2005 Allianz Group had more than €1.26 trillion assets under management.
• The study — Climate Change and Insurance: An Agenda for Action in the United States — is published by WWF and Allianz, and has been prepared in close cooperation with the professionally renowned authors named in the report. The study contains general information and does not take into account specific circumstances which might be relevant for individual readers. The information, expectations and opinions reflected herein constitute judgment as at the date of this study and neither WWF and Allianz nor the authors assume any obligation to update the information and recommendations contained herein. We explicitly advise any reader that the content of the report and the respective recommendations are based on information and expectations that may be subject to changes in the future or may not develop as currently expected. Consequently, the reader should not base any decision solely on the content of this study. The study does not intend to provide any guidance regarding any investment, in particular with respect to securities of Allianz Aktiengesellschaft or any of its subsidiaries.
For further information:
Kerry Zobor, Vice-President for Communications
Tel: +1 202 352 4997
Martin Hiller, Communications Manager
Tel: 41 79 3472256