Insurers across all sectors are acknowledging the impacts ofclimate change on their business, but they are failing to engage indiscussions about how to stay ahead of the potential threats, a newpreparedness study says.

“Every segment of the insurance industry faces climate risks,yet the industry's response has been highly uneven,” says MindyLubber, president of Ceres, which conducted the study. “Theimplications of this are profound because the insurance sector is akey driver of the economy. If climate change undermines the futureavailability of insurance products and risk management services inmajor markets throughout the US, it threatens the economy andtaxpayers as well.”

Ceres conducted the study on 184 insurance-company disclosuresto the National Association of Insurance Commissioners'climate-risk survey. The results showed that out of a possible50-points ranking how the industry reveals its plans to deal withthe organizational and business risks caused by climate change, theaverage score was 7.3. Ceres says that included in the 50-pointscoring system are a company's awareness of increased severeweather on business continuity, pricing, and customer interactions;a plan of how company management deals with these risks; theinnovation of products related to climate change; and even effortsto reduce greenhouse gas emissions.

Meanwhile, 2012 was the second most extreme weather years inU.S. history and the warmest year on record in the lower 48 states,resulting in $58 billion in insured losses in the United Statesalone, Ceres says.

Out of the 23 companies with a definite climate-change strategy,13 are foreign-owned, and eight are property and casualty insurers.Leading this group are ACE Ltd., Munich Re., Allianz Group, SwissRe Group, Farmers Group, The Prudential Group, Travelers Group,Hartford Insurance Group, Kaiser Foundation Health Plan and ZurichUS Insurance.

The Ceres study found that for 60% of companies, impacts onoperations, revenue and profits from the hazard risks of climatechange is a motivating factor for mobilizing a climate-changestrategy. However, about half view climate change as a futureloss driver despite the International Panel on Climate ChangeExtreme Events reporting that it is already amplifying extremeweather and causing insured losses.

Thirty-nine percent of the survey respondents say they worryabout client exposure to climate change, including weather damageto client's physical operations, assets and investments.

Lubber says the push for company transparency is the first andmost important step towards building a strategy to deal with thisnew reality. Insurance companies are complex, and disclosure helpsthem state their goals and manage complications throughout theorganization, when dealing with clients and in writing and placingpolicies.

“Climate change is potentially a serious financial threat to theinsurance industry, and needs to be on insurers' and regulators'radar,” says Washington State Insurance Commissioner Mike Kreidler,a leading advocate for stronger climate-risk disclosure and actionby insurance companies. “If insurance is to remain available andaffordable, companies will need to adapt. The last thing we want tosee are unprepared companies simply pulling out of markets orseeking unreasonable rate hikes.”

He adds, “The underlying issue is that decades of underwritingpractices conducted by the insurance industry are threatenedbecause historical evidence is not going to be the guiding mark towhat we will see in the future.”

Climate change, proposes Ceres, must be treated as acorporate-wide strategic issue that ensures sustainable productdesign and pricing that reflect the possibility of businessinterruption from global weather events, and promoting diverseinvestment policies that endorse the reduction of carbon emissionsand strengthen hazard risk resiliency.

This article was originally posted at PropertyCasualty360.com,a sister site of Credit Union Times.