Navigating Climate Risks: Progress and Challenges in U.S. Insurance Sector Disclosures

As the frequency and severity of climate-driven disasters increase, insurers face mounting costs from escalating claims, potentially even leading to insolvency and market disruption. Between 2017 and 2023, 137 separate billion-dollar disasters cost over $1 trillion in damage. The consequences of these impacts extend far beyond the insurance industry itself, with profound implications for policyholders, businesses, the broader economy, communities, and governments. 

This report is the second annual analysis Ceres has conducted of major U.S. insurers’ climate risk strategies by examining the disclosures companies are making under the National Association of Insurance Commissioner’s Climate Risk Disclosure Survey.  

Our analysis, conducted with Manifest Climate, is based on the responses submitted to the California Department of Insurance from 516 insurance groups, which total more than 1,695 individual companies representing 80 % of the U.S. insurance market and over $2 trillion in direct premiums written in 2022.  

Our analysis reveals a mixed picture of progress and persistent challenges. While some insurance groups have made strides in integrating climate-related risks and opportunities into their governance, strategy, and risk management processes, significant gaps and disparities remain across the sector. 

The urgency of climate risk for the insurance sector requires a significantly faster ramp‑up in all the areas of the Climate Risk Disclosure Survey. As regulators and stakeholders increasingly recognize the systemic nature of climate risks, the pressure on insurers to improve their disclosure practices will only intensify. 

Watch our explainer webinar with Manifest Climate

This is a portion of the NAIC Climate and Resiliency Task Force Meeting (7/9/24). Please start at 2:55 for the presentation.

Key Findings  

(The Climate Risk Disclosure Survey is aligned with the Task Force on Climate-related Financial Disclosures (TCFD) framework that lays four broad categories: governance, strategy, risk management, and metrics and targets that are broken down into 11 specific recommendations of  actions and processes companies should disclose.) 

1. More insurance groups provided disclosures this year, building on an already high rate of response last year — 516 groups submitting responses this year, up from 494 last year.

2. 94 % of the 516 insurance groups are reporting on risk management, 86 % on strategy, 81 % on governance, and 29 % on metrics and targets.  

3. Just 26 % of the 516 insurance groups reported on parameters across the four TCFD broad categories, while 44 % disclosed on three of the four.

4. A year-over-year review of the disclosures from the same insurance groups shows improvement in some of the sub‑areas, including in reporting on how insurers are integrating climate-related risk into their risk management processes, how they are identifying climate-related risks and opportunities, and how they are reporting on scope 1, 2, and 3 GHG emissions. 

5. However, the number of insurer groups reporting declined in two of the sub‑areas: (1) in describing the role that management is playing in assessing and managing climate-related risks and opportunities and (2) in describing the targets they use to manage their risks and opportunities and how the company is performing against those targets. Any area of decline is an especially concerning trend, given the increasing urgency and materiality of climate risks for the insurance industry.  

6. The overall low performance in the metrics and targets area emphasizes the continued challenges insurers are experiencing as they grapple with developing and adopting risk measurement and management processes.  

7. The increasing adoption of climate scenario analysis by insurers is encouraging, as it demonstrates a growing recognition of the importance of assessing the potential long-term impacts of climate change on insurer’s business models and financial performance.  

8. But the lack of transparency on greenhouse gas emissions reductions hinders the ability of regulators, investors, and other stakeholders to fully understand the carbon footprint of companies and their exposure to climate-related risks. 

To search for a specific NAIC Climate Risk Disclosure Survey submission, refer to the California Department of Insurance Results site. 

Our interactive dashboard provides comprehensive TCFD pillar, recommendation, and action item results by company, group, or line of business. The dashboard offers a user-friendly interface to explore and analyze the data.