The global economy depends on effective risk management by consumers, businesses and governments, which has helped make insurance the world’s largest industry. Insurance companies generate $3.4 trillion in premium revenue, plus another $1 trillion in investment income. Still, this vast accumulation of wealth – larger than the GDP of every nation except the US, China and Japan– may not be enough to hedge against the risks of climate change.

In 2007, the sustainability-focused investors coalition Ceres released From Risk to Opportunity: How Insurers Can Proactively and Profitably Manage Climate Change. The report explained that climate change could lead to losses for every sector of the industry:

• Property insurers could face massive damages from rising sea levels and increased incidence of Katrina-like storms.
• Health and life insurers could face claims due to climate change-caused famine, drought, or disease.
• Liability insurers would have to pay if companies are held liable for their greenhouse gas emissions.
• Insurance companies’ portfolios would lose value if climate change lowers investment returns, threatening the stability of those insurers and reinsurers, as well.

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