Climate Change

A Scorecard on Climate Resiliency

A new report helps insurers -- and regulators -- benchmark progress on climate change preparedness.
By: | January 9, 2017 • 4 min read

Since 2010, the National Association of Insurance Commissioners (NAIC) has administered a Climate Risk Disclosure Survey, an eight-item questionnaire that assesses insurers’ approach to and preparedness for climate change.

As weather-related losses continue a steady climb across the globe, some insurers have taken steps to ensure they and their clients are prepared for the risks.

In addition, regulators have an interest in insurers’ climate change resiliency as well, to ensure the marketplace remains stable and comprehensive products are available to companies at affordable prices.

Since 2014, regulators in a handful of states have required that carriers writing more than $100 million in premium take the climate risk survey.

The NAIC survey provides regulators with insight into insurers’ strategies, and helps insurance companies to benchmark their efforts against both themselves and their competitors.

“The top core theme we give the most weight to in our analysis is climate risk governance; are senior managers and corporate directors engaged on the issue? Are they being regularly briefed?” — Max Messervy, co-author, Ceres Insurer Climate Risk Disclosure Survey Report

Ceres in turn evaluates those responses to identify trends and track improvement over time, a practice it began in 2011.

“We systematically look at these responses and see from an industry-wide perspective who is doing what,” said Max Messervy, a co-author of Ceres’ most recent report, “Insurer Climate Risk Disclosure Survey Report & Scorecard: 2016 Findings and Recommendations.”

The survey questions cover areas ranging from investment decisions, risk mitigation efforts, financial solvency, emissions and carbon footprint, and how insurers engage consumers on the issue.

“The top core theme we give the most weight to in our analysis is climate risk governance; are senior managers and corporate directors engaged on the issue? Are they being regularly briefed?” Messervy said.

According to the Ceres report, 25 percent of property/casualty insurers earned a “high quality” rating, meaning they regularly involve their boards of directors in discussions of climate change and sustainability goals.

Diane Cantello, vice president, corporate sustainability, The Hartford

Diane Cantello, vice president, corporate sustainability, The Hartford

“Through numerous studies and our work, it’s been shown to be a good practice to have senior management leadership from the CEO level on down regularly engaging in these issues as they emerge and evaluating economic impact,” Messervy said.

The Hartford, one “high quality” insurer on climate change, created an environment committee to oversee the company’s sustainability strategy.

This committee briefs the board of directors once per year and the executive leadership team – a group of 18 senior managers – twice per year.

The Hartford’s CEO has also participated in White House roundtables on climate resilience.

“The Hartford is recognized regularly for our commitment to corporate sustainability,” said Diane Cantello, vice president of corporate sustainability. “Between 2007 and last year, the company’s energy-related greenhouse gases were reduced by 57 percent.”

Keeping Informed

Another trait shared by “high quality” insurers — those who received at least 75 points from Ceres on a 100-point scale — is their collaboration with the scientific community.

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It all starts with knowledge. Getting the most up-to-date information on climate change both from leading scientists and through internal research is key to understanding the exposure an insurer faces and providing guidance to clients.

Swiss Re, for example, has established itself as a front-runner in conducting climate change research and working with governments and international bodies to facilitate the discussion.

“We’ve provided studies to governments across the globe, helping them to understand the future impact of climate change and develop an adaptation strategy, which includes insurance components.” — Andreas Spiegel, head group sustainability risk, Swiss Re.

“We have developed methodologies to assess and quantify climate risk for certain regions or certain clients; we’ve provided studies to governments across the globe, helping them to understand the future impact of climate change and develop an adaptation strategy, which includes insurance components,” said Andreas Spiegel, head group sustainability risk, Swiss Re.

FM Global, another high-scoring carrier, depends on its in-house engineering staff to evaluate the environmental impact of a variety of risks.

“We have to make sure we give our insureds sound guidance on how they can meet sustainability goals, which means advising them on how their risks can make them less sustainable, but also how their sustainability efforts present new risks in themselves,” said Lou Gritzo, vice president and manager of research, FM Global.

Take a somewhat standard property risk like fire. Gritzo said it is the insurer’s job to advise a client of the environmental impact of a potential fire, including air emissions, runoff from fire hosed, the disposal of burned material, and the effects of rebuilding any damaged structures.

Likewise, if a client decides to go green by installing rooftop solar panels, they should understand the risks that accompany the new equipment.

For its part, The Hartford developed insurance products to help customers reduce greenhouse gas emissions in 2009, and has more recently offered premium discounts to those who opt for electric or hybrid vehicles.

Gritzo said a key challenge for all insurers going forward will be keeping up with advancing climate change science and relaying that information in easily digestible ways to their clients.

New Business Potential

Adapting to climate change also means taking advantage of new business opportunities in renewable energy. Investment portfolios can provide insight into where those opportunities lie, and should therefore get a regular once-over from company leaders.

Fossil fuel producers, for example, counteract sustainability goals and will see performance decline as renewable energy producers move into the energy market and regulations to curb carbon dioxide emissions reduce demand for fossil fuels.

“We’re undergoing a massive energy transition currently, based on the Paris climate agreement signed in December 2015, and basically the economics of renewable energy are becoming increasingly favorable over fossil fuel-based energy,” Messervy said.

“There is a need to understand both the risk and the business opportunity in renewable energy. It’s a core interest for the insurance sector, especially reinsurance because macro risks are where we specialize,” Spiegel said.

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession

Pinnacle Entertainment’s VP of enterprise risk management says he’s inspired by Disney’s approach to risk management.
By: | November 1, 2017 • 4 min read

R&I: What was your first job?

Bus boy at a fine dining restaurant.

R&I: How did you come to work in this industry?

I sent a résumé to Harrah’s Entertainment on a whim. It took over 30 hours of interviewing to get that job, but it was well worth it.

R&I: If the world has a modern hero, who is it and why?

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The Chinese citizen (never positively identified) who stood in front of a column of tanks in Tiananmen Square on June 5, 1989. That kind of courage is undeniable, and that image is unforgettable. I hope we can all be that passionate about something at least once in our lives.

R&I: What emerging commercial risk most concerns you?

Cyber risk, but more narrowly, cyber-extortion. I think state sponsored bad actors are getting more and more sophisticated, and the risk is that they find a way to control entire systems.

R&I: What is the riskiest activity you ever engaged in?

Training and breaking horses. When I was in high school, I worked on a lot of farms. I did everything from building fences to putting up hay. It was during this time that I found I had a knack for horses. They would tolerate me getting real close, so it was natural I started working more and more with them.

Eventually, I was putting a saddle on a few and before I knew it I was in that saddle riding a horse that had never been ridden before.

I admit I had some nervous moments, but I was never thrown off. It taught me that developing genuine trust early is very important and is needed by all involved. Nothing of any real value happens without it.

R&I: What about this work do you find the most fulfilling or rewarding?

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Setting very aggressive goals and then meeting and exceeding those goals with a team. Sharing team victories is the ultimate reward.

R&I: What is the most unusual/interesting place you have ever visited?

Disney World. The sheer size of the place is awe inspiring. And everything works like a finely tuned clock.

There is a reason that hospitality companies send their people there to be trained on guest service. Disney World does it better than anyone else.

As a hospitality executive, I always learn something new whenever I am there.

James Cunningham, vice president, enterprise risk management, Pinnacle Entertainment, Inc.

The risks that Disney World faces are very similar to mine — on a much larger scale. They are complex and across the board. From liability for the millions of people they host as their guests each year, to the physical location of the park, to their vendor partnerships; their approach to risk management has been and continues to be innovative and a model that I learn from and I think there are lessons there for everybody.

R&I: What is the risk management community doing right?

We are doing a much better job of getting involved in a meaningful way in our daily operations and demonstrating genuine value to our organizations.

R&I: What could the risk management community be doing a better job of?

Educating and promoting the career with young people.

R&I: What have you accomplished that you are proudest of?

Being able to tell the Pinnacle story. It’s a great one and it wasn’t being told. I believe that the insurance markets now understand who we are and what we stand for.

R&I: Who is your mentor and why?

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John Matthews, who is now retired, formerly with Aon and Caesar’s Palace. John is an exceptional leader who demonstrated the value of putting a top-shelf team together and then letting them do their best work. I model my management style after him.

R&I: What is your favorite book or movie?

I read mostly biographies and autobiographies. I like to read how successful people became successful by overcoming their own obstacles. Jay Leno, Jack Welch, Bill Harrah, etc. I also enjoyed the book and movie “Money Ball.”

R&I: What is your favorite drink?

Ice water when it’s hot, coffee when it’s cold, and an adult beverage when it’s called for.

R&I: What does your family think you do?

In my family, I’m the “Safety Geek.”

R&I:  What’s your favorite restaurant?

Vegas is a world-class restaurant town. No matter what you are hungry for, you can find it here. I have a few favorites that are my “go-to’s,” depending on the mood and who I am with.

If you’re in town, you should try to have at least one meal off the strip. For that, I would suggest you get reservations (you’ll need them) at Herbs and Rye. It’s a great little restaurant that is always lively. The food is tremendous, and the service is always on point. They make hand-crafted cocktails that are amazing.

My favorite Mexican restaurant is Lindo Michoacan. There are three in town, and I prefer the one in Henderson as it has the best view of the valley. For seafood, you can never go wrong with Joe’s in Caesar’s Palace.




Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]