On December 12, 2015 leaders from 195 countries signed a historic accord which requires countries to submit their long-term emission-cutting plans by 2020 in an effort to limit global warming to no more than two degrees Celsius above pre-industrial levels. The article discusses the fact that insurers not only face weather-related risks from a warming world but could also face risks from a changing economy. A recent report by the PRA of the Bank of England outlined three areas of risk for the U.K. Insurance Sector including Physical Risks (losses from weather-related events), Liability Risks (insured liability risks from climate change) and Transition Risks (potential devaluation of certain insurer assets). Some insurers have recently announced divestiture of coal investments and others are reviewing their investment portfolios. The California Insurance Commissioner has recently called on insurers to voluntarily divest their coal investments to avoid the potential for stranded assets and to de-carbonize their investment portfolios. The Insurance Commissioner will initiate a data call to better understand the extent insurers’ carbon based investments. With all these events and growing concerns it is important for insurers to examine their risks.
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