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Insurance, reinsurance and climate-related risk management



A number of reinsurance companies – the insurers of the insurance firms – have started to address climate change issues, but many still ignore the importance of considering the effects of natural disasters. Ilaria Bertini writes how this lack of long-term thinking might cost them more than they expect.

According to the Insurer Climate Risk Disclosure Survey 2012, commissioned by Ceres, only 23 out of 184 American insurers have effective climate change strategies.

Ceres president Mindy Lubber said, “Every segment of the insurance industry faces climate risks, yet the industry’s response has been highly uneven.

The implications of this are profound because the insurance sector is a key driver of the economy. If climate change undermines the future availability of insurance products and risk management services in major markets throughout the US, it threatens the economy and taxpayers as well.”

The study has considered insurance companies in three states – California, New York and Washington – where the majority of the market is based.

Ceres explained that extreme weather events have caused huge economic damages for US firms, with Hurricane Sandy alone accounting for a $50 billion loss.

Charlene Leurig from Ceres, contributor to the report, told campaign website Care2, “Many of them are fumbling in the dark, pricing risk without understanding it.” She added that some firms had even expressed sceptical views of climate change.

Thirteen out of the 23 companies that had climate change strategies were based abroad. Leurig said that once companies realise that extreme weather events might harm their operations financially, many decide to move away. This has happened in Florida, for instance.

The report concludes that insurance companies, especially the small ones, should prepare to face climate change consequences for their clients with effective and planned assessments.

The reasons for adopting such strategies, according to the 23 companies analysed, range from issues relating to returns, and how climate change might impact them financially, to clients’ exposure and related reputational benefits.

But while only a few insurers are ready to deal with extreme weather conditions, health problems and other issues related to climate change, some of the biggest reinsurance companies have prepared themselves with focused strategies regarding future climate accidents.

Reinsurers are the investors that provide insurance to the insurance companies, as a form of risk management.

The majority have seriously considered the possible implications of climate change on their business, as they realise that being unprepared might mean they have to face larger losses.

Reinsurers like Munich Re and Swiss Re, leading companies in climate risk management, know that climate change and climate-related disasters are likely to become ever-more frequent and are likely to affect the next generation of investors.

Swiss Re understands the relationship between climate and natural disaster risk and the societal impact of both”, the Zurich-based firm states on its website.

We’ve been shaping the global climate agenda through dialogue with our public and private sector partners, cutting-edge research and innovative risk transfer solutions for over two decades.”

At the same time, these companies also often stress the important role that renewable energy might have in the future, with many of the opinion that insurance companies should contribute to the sector’s growth.

Chadbourne insurance and reinsurance group, for example, thinkswhile climate change poses potential threats, it also creates vast new business opportunities for insurers and reinsurers.”

Munich Re highlighted in a January report that last year in the US, natural disasters caused $160 billion worth of economic losses.

Board member Torsten Jeworrek said, “The heavy losses caused by weather-related natural catastrophes in the USA showed that greater loss-prevention efforts are needed.”

Although some insurers and reinsurers seem to have made climate-related issues a core element of their risk management, the overall picture emerging from Ceres study shows that a greater effort is needed.

The report concludes by suggesting investors should implement their strategy and consider climate change as a “corporate-wide strategic issue” to be treated by anticipating possible effects of natural disasters.

Big investors, such as reinsurers, should seriously start to improve their climate change strategies. Not only because this would help their clients – and their business – on a long-term perspective, but also because it is the best way to send a clear message to the corporate and institutional world: that climate change does exist and we do have to deal with it.

Further reading:

Insurance industry can help drive renewables, says Swiss Re report

Time to offload the high-risk, low-return carbon assets

From austerity to scarcity: the coming global crisis

Ethical insurance: protection for the days when it goes wrong


How Going Green Can Save A Company Money



going green can save company money
Shutterstock Licensed Photot - By GOLFX

What is going green?

Going green means to live life in a way that is environmentally friendly for an entire population. It is the conservation of energy, water, and air. Going green means using products and resources that will not contaminate or pollute the air. It means being educated and well informed about the surroundings, and how to best protect them. It means recycling products that may not be biodegradable. Companies, as well as people, that adhere to going green can help to ensure a safer life for humanity.

The first step in going green

There are actually no step by step instructions for going green. The only requirement needed is making the decision to become environmentally conscious. It takes a caring attitude, and a willingness to make the change. It has been found that companies have improved their profit margins by going green. They have saved money on many of the frivolous things they they thought were a necessity. Besides saving money, companies are operating more efficiently than before going green. Companies have become aware of their ecological responsibility by pursuing the knowledge needed to make decisions that would change lifestyles and help sustain the earth’s natural resources for present and future generations.

Making needed changes within the company

After making the decision to go green, there are several things that can be changed in the workplace. A good place to start would be conserving energy used by electrical appliances. First, turning off the computer will save over the long run. Just letting it sleep still uses energy overnight. Turn off all other appliances like coffee maker, or anything that plugs in. Pull the socket from the outlet to stop unnecessary energy loss. Appliances continue to use electricity although they are switched off, and not unplugged. Get in the habit of turning off the lights whenever you leave a room. Change to fluorescent light bulbs, and lighting throughout the building. Have any leaks sealed on the premises to avoid the escape of heat or air.

Reducing the common paper waste

paper waste

Shutterstock Licensed Photo – By Yury Zap

Modern technologies and state of the art equipment, and tools have almost eliminated the use of paper in the office. Instead of sending out newsletters, brochures, written memos and reminders, you can now do all of these and more by technology while saving on the use of paper. Send out digital documents and emails to communicate with staff and other employees. By using this virtual bookkeeping technique, you will save a bundle on paper. When it is necessary to use paper for printing purposes or other services, choose the already recycled paper. It is smartly labeled and easy to find in any office supply store. It is called the Post Consumer Waste paper, or PCW paper. This will show that your company is dedicated to the preservation of natural resources. By using PCW paper, everyone helps to save the trees which provides and emits many important nutrients into the atmosphere.

Make money by spreading the word

Companies realize that consumers like to buy, or invest in whatever the latest trend may be. They also cater to companies that are doing great things for the quality of life of all people. People want to know that the companies that they cater to are doing their part for the environment and ecology. By going green, you can tell consumers of your experiences with helping them and communities be eco-friendly. This is a sound public relations technique to bring revenue to your brand. Boost the impact that your company makes on the environment. Go green, save and make money while essentially preserving what is normally taken for granted. The benefits of having a green company are enormous for consumers as well as the companies that engage in the process.

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5 Easy Things You Can Do to Make Your Home More Sustainable




sustainable homes
Shutterstock Licensed Photot - By Diyana Dimitrova

Increasing your home’s energy efficiency is one of the smartest moves you can make as a homeowner. It will lower your bills, increase the resale value of your property, and help minimize our planet’s fast-approaching climate crisis. While major home retrofits can seem daunting, there are plenty of quick and cost-effective ways to start reducing your carbon footprint today. Here are five easy projects to make your home more sustainable.

1. Weather stripping

If you’re looking to make your home more energy efficient, an energy audit is a highly recommended first step. This will reveal where your home is lacking in regards to sustainability suggests the best plan of attack.

Some form of weather stripping is nearly always advised because it is so easy and inexpensive yet can yield such transformative results. The audit will provide information about air leaks which you can couple with your own knowledge of your home’s ventilation needs to develop a strategic plan.

Make sure you choose the appropriate type of weather stripping for each location in your home. Areas that receive a lot of wear and tear, like popular doorways, are best served by slightly more expensive vinyl or metal options. Immobile cracks or infrequently opened windows can be treated with inexpensive foams or caulking. Depending on the age and quality of your home, the resulting energy savings can be as much as 20 percent.

2. Programmable thermostats

Programmable thermostats

Shutterstock Licensed Photo – By Olivier Le Moal

Programmable thermostats have tremendous potential to save money and minimize unnecessary energy usage. About 45 percent of a home’s energy is earmarked for heating and cooling needs with a large fraction of that wasted on unoccupied spaces. Programmable thermostats can automatically lower the heat overnight or shut off the air conditioning when you go to work.

Every degree Fahrenheit you lower the thermostat equates to 1 percent less energy use, which amounts to considerable savings over the course of a year. When used correctly, programmable thermostats reduce heating and cooling bills by 10 to 30 percent. Of course, the same result can be achieved by manually adjusting your thermostats to coincide with your activities, just make sure you remember to do it!

3. Low-flow water hardware

With the current focus on carbon emissions and climate change, we typically equate environmental stability to lower energy use, but fresh water shortage is an equal threat. Installing low-flow hardware for toilets and showers, particularly in drought prone areas, is an inexpensive and easy way to cut water consumption by 50 percent and save as much as $145 per year.

Older toilets use up to 6 gallons of water per flush, the equivalent of an astounding 20.1 gallons per person each day. This makes them the biggest consumer of indoor water. New low-flow toilets are standardized at 1.6 gallons per flush and can save more than 20,000 gallons a year in a 4-member household.

Similarly, low-flow shower heads can decrease water consumption by 40 percent or more while also lowering water heating bills and reducing CO2 emissions. Unlike early versions, new low-flow models are equipped with excellent pressure technology so your shower will be no less satisfying.

4. Energy efficient light bulbs

An average household dedicates about 5 percent of its energy use to lighting, but this value is dropping thanks to new lighting technology. Incandescent bulbs are quickly becoming a thing of the past. These inefficient light sources give off 90 percent of their energy as heat which is not only impractical from a lighting standpoint, but also raises energy bills even further during hot weather.

New LED and compact fluorescent options are far more efficient and longer lasting. Though the upfront costs are higher, the long term environmental and financial benefits are well worth it. Energy efficient light bulbs use as much as 80 percent less energy than traditional incandescent and last 3 to 25 times longer producing savings of about $6 per year per bulb.

5. Installing solar panels

Adding solar panels may not be the easiest, or least expensive, sustainability upgrade for your home, but it will certainly have the greatest impact on both your energy bills and your environmental footprint. Installing solar panels can run about $15,000 – $20,000 upfront, though a number of government incentives are bringing these numbers down. Alternatively, panels can also be leased for a much lower initial investment.

Once operational, a solar system saves about $600 per year over the course of its 25 to 30-year lifespan, and this figure will grow as energy prices rise. Solar installations require little to no maintenance and increase the value of your home.

From an environmental standpoint, the average five-kilowatt residential system can reduce household CO2 emissions by 15,000 pounds every year. Using your solar system to power an electric vehicle is the ultimate sustainable solution serving to reduce total CO2 emissions by as much as 70%!

These days, being environmentally responsible is the hallmark of a good global citizen and it need not require major sacrifices in regards to your lifestyle or your wallet. In fact, increasing your home’s sustainability is apt to make your residence more livable and save you money in the long run. The five projects listed here are just a few of the easy ways to reduce both your environmental footprint and your energy bills. So, give one or more of them a try; with a small budget and a little know-how, there is no reason you can’t start today.

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