The Australian insurance industry needs to become an advocate a more ambitious approach to tackling climate change, according to Monica Richter, WWF-Australia’s business engagement manager – climate change.
A report released this week by the organisation shows that three of Australia’s biggest insurers are behind the eight ball on public statements regarding climate change action and how climate-related risk is being managed.
Insurance and Climate Change Disclosure in Australia examines the publicly disclosed policies and statements on global warming of general insurers IAG, QBE and Suncorp and compares these with selected international insurers AXA, Alliance and Prudential.
It also compares the local insurers with the big four banks – ANZ, Commonwealth, NAB and Westpac.
The report found not one of the three local firms had climate change statements in their annual review or sustainability reports.
By contrast, global firms are proactively communicating on climate change. AXA just last month released a landmark survey of the SME sector and urban leaders from around the world looking at the degree to which climate change is already impacting business and the degree to which urban leaders are succeeding in making cities more resilient. It found that 79 per cent of respondents said the insurance industry should be doing more to help businesses adapt to the consequences of climate change.
Ms Richter said the WWF report aimed to raise the question of what the Australian insurers’ positions were on climate change, and to encourage them to disclose their views publicly.
“Global warming will have significant impacts on the insurance industry through increased claims, reputational damage, decline in insurance affordability, and an increase in uninsurable sectors or geographies,” Ms Richter said.
“Without full public disclosure of their climate-related risks and management strategies, Australian consumers and shareholders are left vulnerable to unexpected costs and regulatory shifts.”
The report shows that two firms were committed to international statements around sustainability and climate, with IAG and Suncorp both signatories to the Geneva Association statement on climate change risks, and IAG a signatory to the UN Principles for Sustainable Insurance.
A spokeswoman for IAG told The Fifth Estate the company was also a signatory to the UN principles for Responsible Investment and is certified Carbon Neutral, purchasing offsets in FY2014 through a hydroelectric project in China, a biomass project in Thailand and protection of native forests in Tasmania.
She said there was extensive discussion within the firm around climate change, however in public communications it tended to use the term “extreme weather”, with an acknowledgement that these types of events are occurring more often.
It is also a member of the Australian Business Roundtable for Disaster Resilience and Safer Communities, and in that capacity has lobbied policymakers for better building standards and improved land use planning to improve resilience.
“We focus on what needs to happen before the storm hits,” the spokeswoman said.
“We are involved in looking at climate change, but we don’t tend to talk about it publicly.”
The report also looked at any statements the firms had made around investment strategies and progress towards divesting from fossil fuels and other carbon-intensive sectors. WWF found no such statements were publicly available.
The IAG spokeswoman said the firm used a range of funds managers, but that “investments in things like resources are something people would probably treat with caution”.
“Like anyone else, we are looking to invest in businesses that will be sustainable over the long term,” she said.
The firm also intends to keep raising climate change risks in submissions to policy makers, and is looking at additional ways it can communicate on the issue and on improving community resilience.
“The report makes a good point,” she said. “We probably do need to look at whether there is some way we can make that talk more visible publicly.”
A spokeswoman for Suncorp said the company “recognises that an increase in the frequency and severity of natural hazard events impacts the community and our business, and we adjust our provisions for such events annually”.
She said the company’s general insurance business was publicly advocating for greater investment in natural disaster mitigation to better protect property and communities, and ways to address affordability issues by reducing risk through measures such as constructing levees in flood-prone areas and making homes more cyclone resilient in Northern Australia.
“Suncorp has launched its Protecting the North microsite to inform people about our policy, which is designed around mitigating, or reducing, the damage cyclones cause to houses, which is the best way to reduce insurance costs to homeowners,” the spokeswoman said.
The company’s focus is on working with governments and the community to identify ways of mitigating the effects of extreme weather events.
“There is still more that could be done, especially in relation to development planning and driving improved cyclone resistant building standards,” she said.
Ms Richter said that looking at their investment portfolios was also important, as there were shifts in the financial sector being driven by groups like Market Forces and 350.org that may create a risk of shareholder backlash.
“Insurance companies are large investors, with a large portfolio,” she said.
“The writing is on the wall for those kinds of companies, that they need to make their investment strategies public.”
Ms Richter said WWF hoped the report gave sustainability managers and others within these firms encouragement to take a leadership role on managing the risks of climate change.
The insurance industry had some of the world’s best risk managers, she said.
“We are urging Australian insurance companies to do the right thing by their customers and shareholders by improving their public disclosure of climate change risks and costs, as well as advocating for stronger climate action,” Ms Richter said.
“We need the industry to be speaking out.”
QBE and the Insurance Council of Australia were both contacted for comment, but calls were not returned before deadline.
UPDATE: Insurance Council of Australia chief executive Rob Whelan has provided a statement to The Fifth Estate, which says:
“It is the role of governments to protect communities from hazards such as floods, cyclones, storms and bushfires, and make appropriate planning decisions to account for anticipated changes in sea levels.
“The general insurance industry closely monitors the climate change debate. Its focus is on the need for Australia to become more resilient, through government action, to the community’s increasing risk profile caused by extreme weather.
“Investment strategies and statements by publicly listed companies are a matter for those individual companies.
“The Insurance Council of Australia has identified four key concerns that require action if communities are to be better protected from extreme weather:
- A systemic failure to mitigate many preventable hazards such as flood
- Building codes that do not protect buildings
- Land-use planning regimes that, though improving, still allow risk-inappropriate development
- A taxation system that penalises those who insure through insurance stamp duties
“The ICA is discussing the need for better planning laws with governments to ensure new properties are built to withstand natural disasters by revising building standards to improve resilience.
“The ICA continues to talk to all levels of government about investing in permanent mitigation for flood-prone communities and introducing measures that will improve the resilience of buildings in high-risk areas for cyclones and bushfires.”