A global clean energy transformation is underway—and it has significant implications for fossil fuel companies and their investors.
This new Ceres report, Assets or Liabilities? Fossil Fuel Investments of Leading U.S. Insurers, focuses on the risks to insurance companies—the second-largest type of institutional investor after pension funds based on assets under management.
It is already well understood by U.S. insurance regulators that insurers' massive bond and equity holdings expose them to both credit risk and systemic/market risk. As insurers also face uncertainty related to the size and timing of their insured loss payouts, insurance regulators require companies to invest conservatively so they can meet their financial obligations and remain financially stable.
In light of these factors, as well as the crucial role of insurers in providing a safety net in the face of climate change, Ceres examined the 40 largest US insurance group's investments (bonds, common stock, and preferred stock) in the oil and gas, coal and electric/gas utilities sectors.
Are insurers, and the industry's regulators, taking action to identify and evaluate their potential investment exposure? What are the best strategic options for companies to reduce identified threats, and how should regulators assess insurers' risk management?