[SustainableTompkins] New combatant against global warming: insurance industry

[GayNicholson at aol.com]

 (http://www.csmonitor.com/) 
 
 
 
 
     
 
 
 
 
 
 
    from the October 13, 2006 edition -  
http://www.csmonitor.com/2006/1013/p01s01-usec.html  
New combatant against global warming: insurance  industry 
The world's second-largest industry, worried about losses  related to climate 
change, offers incentives to 'go green.'   
By _Ron  Scherer_ 
(http://www.csmonitor.com/cgi-bin/encryptmail.pl?ID=D2EFEEA0D3E3E8E5F2E5F2)  | Staff writer of The Christian Science  Monitor  
NEW  YORK  
Insurance companies, who like to stay out of the limelight, are  becoming 
leading business protagonists in the assault on global  warming. 
• Next week, Travelers, the giant insurance firm, will offer  owners of 
hybrid cars in California a 10 percent discount. It  already offers the discount in 
41 other states and has cornered a  large share of the market. 
• This fall, Fireman's Fund will cut premiums for "green"  buildings that 
save energy and emit fewer greenhouse gases. When it  pays off claims, it will 
direct customers to environmentally  friendly products to replace roofs, 
windows, and water heaters. 
• In January, Marsh, the largest insurance broker in the US, will  offer a 
program with Yale University to teach corporate board  members about their 
fiduciary responsibility to manage exposure to  climate change. 
The insurance industry's clout is sizable. It's the  second-largest industry 
in the world in terms of assets, and has a  direct link to most homeowners and 
businesses. It insures coal-fired  power plants as well as wind farms, so it 
can influence the power  industry's cost structure. With its financial muscle, 
the industry  could help advance the use of new financial instruments 
designed to  allow companies to trade greenhouse-gas emissions in the same way  that 
commodities are bought and sold. 
"The insurance industry has the ability to change behavior,  policies and 
communicate with clients," says Nancy Skinner, US  director of the Climate Group, 
which lobbies for business and  government action to address global warming. 
Some consumers are already noticing a negative effect of this  shift. In the 
past year, some 600,000 homeowners living in a zone  that an insurer considers 
a high storm risk in an era of climate  change have seen their policies 
cancelled or not renewed. This  includes coastal areas stretching from Texas to New 
York. Currently,  coastal properties are valued at $7.2 trillion.Reassessing  
risk  
One reason for this massive change in coverage is an ongoing  shift in the 
way insurance companies view risk. Insurers are  starting to change their 
risk-assessment models to reflect future  climate-change scenarios instead of past 
weather patterns. 
"Climate change represents an ever- increasing risk, a risk far  too great to 
ignore," says Clement Booth, a member of the Board of  Management at Allianz 
AG, one of the world's largest insurance  firms. 
This week, Allianz, in cooperation with the World Wildlife Fund,  issued a 
report on steps the insurance industry could take to reduce  the physical impact 
of global warming or to help society adapt. 
"The industry is in a unique position to incentivize," says  Miranda 
Anderson, an author of the report and a vice president at  David Gardiner & 
Associates. "This is the very beginning of  thinking through this issue." 
In fact, the industry is not driven just by an attempt to help  the 
environment: It also wants to make money. In Travelers' case,  the impetus to give a 
policy discount on hybrid cars came when Greg  Toczydlowski, a senior vice 
president of product management, was  gassing up his wife's Ford Excursion. 
"A hybrid zipped in and out while I was still pumping, and it  occurred to me 
it takes so little gasoline and runs so much longer  on a tank," says Mr. 
Toczydlowski. "I came back and did research on  how many hybrids are out there 
and what's the profile of the  customer. We discovered it was a preferred 
customer - middle-aged,  very responsible, and stable financially." 
Now hybrid owners, besides saving on their fuel bills, can save  money on 
their auto insurance - about $100 a year, according to  Travelers.Attentive state 
regulators  
The attention on climate change is likely to receive a boost from  state 
insurance regulators, who had planned to discuss its risks in  September 2005 in 
New Orleans, at their annual meeting. Hurricane  Katrina intervened, however, 
and the meeting was moved to  Chicago. 
"As a result, regulators spent an enormous amount of time on  climate change 
and what changes to promulgate to make sure the  companies are financially 
sound," says Mindy Lubber, president of  Ceres, a coalition of investors, 
environmental groups, and  public-interest organizations in North America. 
Ceres has made two reports on what the insurance industry can do  to 
profitably manage climate change. In a report issued in August,  Ceres details some 
steps currently under way, such as Swiss Re's  investment in new solar 
technology, Munich Re's insurance renewable  energy projects, and Lloyds of London's 
insurance on predicted  energy savings. 
In the US, one of the more unique and potentially far-reaching  efforts will 
be rolled out this fall by Fireman's Fund. After a  building is damaged, 
Fireman's will specify that it must be repaired  with "greener" materials, 
including consumer electronics that must  have Energy Star ratings from the 
Environmental Protection Agency.  If a building is a total loss, it will be rebuilt as a 
"green"  building. The insurer also plans to pay for an engineer to make sure 
 ventilation systems and boilers are installed properly, which could  also 
save energy. 
"All the evidence suggests [that] if you decrease energy usage in  a 
building, the owner's net operating income increases and you will  improve the asset 
value," says Steven Bushnell, product director of  Fireman's, owned by Allianz. 
Insurance companies, adept at managing risk, are also trying to  educate 
their customers. Marsh and Yale will train 200 board  directors to understand 
risks of climate change. Again, part of the  motivation is money: Insurance 
companies provide liability insurance  for board members. 
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----------------------------------------------------
Gay  Nicholson, Ph.D. 

607-533-7312 (home office)
607-279-6618  (cell)

1 Maple Avenue
Lansing, NY  14882
gaynicholson at aol.com

Sustainable Tompkins 
Program  Coordinator 
w_ww.sustainabletompkins.org_ (http://www.sustainabletompkins.org/) 

Southern Tier Energy$mart Communities
Regional  Coordinator
Cornell Cooperative Extension of Tompkins County
615 Willow  Ave., Ithaca, NY  14850
agn1 at cornell.edu