Insurers should give incentives for residential renewables

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Report suggests insurers should give incentives for residential renewables

MUNICH, Germany, October 25, 2006 (Refocus Weekly) Insurers in the United States could offer incentives to homeowners who invest in renewable energy systems or energy efficiency, suggests a major insurance firm and a leading conservation group.

New business opportunities may emerge from environmental remediation or new products that are designed to mitigate climate change, explain the Allianz Group and World Wildlife Fund in ‘Climate Change & Insurance: An Agenda for Action in the United States.’ Examples include new or customized insurance initiatives such as ‘bundling’ or targeted marketing of existing insurance products for developers of wind, solar, biomass and other renewable energy technologies and projects that generate carbon credits within emissions trading systems, it explains.

The report says climate change poses serious risks to insurers and their customers in the U.S., and says insurers can do more to address risks and ensure affordable coverage for consumers. It is the first time that a major insurance company has released a study of this kind in the U.S., and it examines scientific findings on climate change to assess the potential impact on the insurance industry and its customers.

Allianz has already announced its intention to invest US$600 million in renewable energy projects over the next five years, and will introduce an internet-based tool to help customers manage their exposure to natural catastrophes.

Climate change has the potential to significantly alter and intensify destructive weather patterns which lead to increased flooding, forest fires and storm damage, the report notes. The most direct risk to the U.S. will come from hurricanes, which are expected to become more frequent and powerful, but rising sea levels could also inundate many coastal cities and portions of coastal states, while forest fires become more frequent.

Environmental changes could push the price of insurance too high for customers in high-risk areas, and some insurers are already abandoning markets in states that are vulnerable to hurricanes. Allianz and WWF want to engage the insurance industry, governments and regulators to manage the risks associated with climate change.

Fireman's Fund Insurance, a unit of Allianz, will introduce commercial insurance policies this year to encourage development of green buildings which reduce energy consumption and GHG emissions. One product will provide a discount to LEED (Leadership in Energy & Environmental Design) certified buildings.

“We need to better understand the effects of climate change and the changing environment for our customers,” says Clem Booth of Allianz. “But if we can find a way to provide insurance in the face of major changes, from the first transatlantic voyages to global terrorism, then we can find new ways to address climate change."

"Global warming is the greatest environmental threat facing the world, and the people and animals that inhabit it; the cost of doing nothing carries a price tag none of us can afford,” adds Carter Roberts of WWF-US. “The insurance industry has a vested interest in stepping up to the plate and being a part of the solution. Allianz has been a leader on this issue and we hope that the entire industry makes climate change a top priority.”

The report recommends that governments and insurance companies communicate appropriate signals to homeowners and companies moving into high risk areas, and says regulators must consider carefully the impact of programs which keep insurance rates artificially low. By masking the real price of risk, such policies encourage over-development in high risk areas, it explains.

The report also suggests that U.S. insurers start to incorporate future potential climate change impacts into their planning, such as continued sea level rise and longer fire seasons, rather than relying only on historical data of past weather events. Another way to minimize losses related to climate change is to promote energy-efficient building materials and improved building codes to emphasize “the win-win opportunity for customers presented by energy efficient buildings that also incorporate state-of-the-art protection against wind damage, fire, and water influx.”

Companies should “commit to make internal operations climate neutral through usage of alternative energy, funding of sequestration projects, efficiency improvements and ‘green’ purchasing, and carbon offset purchases,” it suggests.

Allianz Group is one of the world's largest insurers with 177,000 employees in 70 countries, 60 million customers and annual revenue of Euro 100 billion with Euro 1.26 trillion in assets under management.
Known in the United States as World Wildlife Fund, WWF works in 100 countries and has 4 million members worldwide. It is the world's largest privately-financed conservation organization.