Commissioner discloses insurers' carbon investments facing climate risk
News: 2017 Press Release
According to the financial data disclosed, insurers surveyed have $521 billion in fossil fuel-related securities, which include investments in coal, oil, gas and utilities that rely on coal, oil and gas, $10.5 billion of which consists of investments in thermal coal enterprises.
Since the announcement of Commissioner Jones' Initiative, insurers have already divested more than $4 billion in thermal coal and other fossil fuel investments, and have committed to disposing of an additional $881 million in thermal coal investments. The data also showed that 303 insurance companies have already analyzed the concentration of carbon risk in their investment portfolio, and another 81 agreed to do so in the next 12 months. Insurer responses revealed that 670 companies divested some or all of their coal holdings, or had no coal holdings to divest, and 325 companies acknowledged that they would refrain from making future investments in thermal coal.
"Investments in carbon -- oil, gas, coal -- face significant potential financial risk from climate change as governments, private companies, and markets continue to move to reduce the burning of carbon," said Commissioner Jones. "As a financial regulator, I want to make sure that insurance companies are invested in assets that retain value, not decrease in value, so that insurers have sufficient assets to pay claims. Requiring insurers to analyze and disclose their carbon investments allows regulators, investors, insurers, policyholders, and the general public to understand and address any potential climate risk associated with these investments."
As regulator of the largest insurance market in the nation, Jones launched the Climate Risk Carbon Initiative because of the potential for investments in coal, oil, gas and utilities burning carbon to become "stranded assets" on the books of insurers with little or no value as governments, private companies and markets may slowly or dramatically reduce the demand for carbon based fuels and their value drops. Jones is the first financial regulator to ask that a financial sector -- in this case insurance companies-- divest from thermal coal and to publicly disclose their holdings in oil, gas, coal and utilities, due to potential climate related risks. The Commissioner unveiled a new searchable online public database disclosing insurers' responses to his request that they divest from thermal coal and disclosing their investments in coal, oil, gas and utilities. The disclosures also may be used to enhance regulators' future in-depth financial analysis and financial examinations of individual insurance companies to further understand the potential climate risks associated with these investments.
"The volatility in energy prices over the past few years has demonstrated the hard way why fiduciaries like the insurance industry need to consider how climate risks might impact their fossil fuel holdings, particularly coal," said Amy Myers Jaffe, executive director, energy and sustainability of University of California, Davis. "We have already seen write downs on energy holdings dent returns for many institutional investors in 2015 and 2016 and the long term risks could be more significant."
"Climate change is real and it poses potentially significant financial risks to carbon investments, including those held by insurance companies. It is critically important that insurers, regulators and the public are considering and taking steps to understand and address these and other climate risks," Jones added.
- Climate Risk Carbon Initiative online database
- Digitalized replay scheduled to begin on Wednesday, January 18, 2017 at 11:30 a.m. PT
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The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $289 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $469 million in claims and premiums. Please visit the Department of Insurance web site at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800.927.HELP or 213.897.8921. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.