June 09, 2023

Wyden, Whitehouse, Sanders Launch Investigation into Major Insurance Companies’ Climate Risk Evaluation, Fossil Fuel Support

Washington, D.C. – U.S. Senator Ron Wyden, D-Ore., and fellow Senate Budget Committee members Senators Sheldon Whitehouse, D-R.I., and Bernie Sanders, I-Vt., today launched an investigation into how the U.S. insurance industry evaluates climate-related risks, decides to invest in or underwrite fossil fuel expansion projects that drive such risks, and prices policies that insure such projects.

“Witnesses have warned that sea level rise and wetter, more intense storms could eventually make more than $1 trillion in coastal real estate uninsurable, and therefore unmortgageable, leading to a coastal property values crash; that more frequent and intense wildfires could result in a similar death spiral for western property in the wildland-urban interface; that climate-related losses are making it harder for the insurance industry to price risk, already resulting in insolvencies among regional insurers; and that, as demand for oil and gas declines, hundreds of billions of dollars in fossil fuel assets may be stranded,” Wyden, Whitehouse, and Sanders wrote to 7 insurance companies as part of a Senate Budget Committee investigation.

The investigation follows a series of hearings held by the Budget Committee that have examined the economic risks associated with climate change. Central bankers, economists, insurance industry executives, financial experts, and others have testified before the committee that climate change poses multiple “systemic risks” to the economy—risks with the potential to cascade beyond immediately affected sectors to cause economy-wide harm, akin to the 2008 financial crisis.

Many insurance companies are beginning to limit the scope of coverage they will provide—or pull out of markets entirely—due to their assessments of the likelihood of coming “catastrophic risk” caused by climate change. At the same time, the U.S. insurance industry is continuing to support fossil fuel expansion: U.S. insurers currently have about $582 billion invested in fossil fuels, including nearly $90 billion in coal alone.

“...[I]n the United States, the insurance industry continues to support existing and expanded fossil fuel projects with few restrictions in place limiting—or excluding—either. U.S. insurers continue to underwrite polluting projects while making investments in an industry whose continued expansion poses multiple serious dangers to overall economic stability and to insurance services in particular,” the senators continued.

In letters sent to AIG, Berkshire Hathaway, Chubb, Liberty Mutual, Starr, State Farm, and Travelers, the senators pressed the companies to disclose:

  • Why and how they are still supporting the underwriting of and investment in new and expanded fossil fuel projects;
  • What plans they have to follow the example of global insurance counterparts, many of which have begun restricting their underwriting of fossil fuel projects;
  • What plans they have to divest their fossil fuel-related investments;
  • And what methodology they use to evaluate future impact on climate of their investment and underwriting decisions, among other questions. 

The senators also requested information about how the insurance companies evaluate their responsibilities with respect to the principle of Free, Prior, and Informed Consent, which ensures Indigenous Peoples can give or withhold consent for any action that would affect their lands, territories, or rights and is protected by international human rights standards.

The letters are here.