Here are some insurance company highlights...
American International Group (AIG) unveiled a new climate change strategy on May 15, 2006. AIG is the first U.S. insurer to publicly state a belief that there are risks and opportunities as a result of climate change, and their new program includes: improved sophistication of catastrophe exposure modeling; allocation of additional private equity investments to projects, technologies, and other assets that contribute to GHG emission mitigation; generation of tradable carbon credits; development of risk management/derivative products to support the carbon market; continued offering of environmental remediation and environmental liability insurance; among many other things.
Fireman’s Fund Insurance Company is in the final stages of developing several new “green”products that seek to minimize environmental and climate impact, while also garnering bottom-line benefits for FFIC and its customers.The first product is a new property insurance policy for LEED or Green Globes Certified buildings. This new coverage will specifically apply to the unique attributes of green buildings not covered by conventional property policies, such as solar panels, green roofs, and recycled water supply systems. Because green buildings are proven to be less prone to water damage, electrical fires, or full loss due to fire, FFIC will offer a rate credit of 5% to these building owners.
Traveler’s Auto Insurance announced in February, 2006 that it would offer a 10% discount on auto insurance to drivers of hybrid-electric vehicles. The company also developed an online community for hybrid drivers called www.hybridtravelers.com. The firm sees this move as an opportunity to gain market share with the LOHAS (Lifestyles of Health and Sustainability) market, a $227 billion market segment.
AIG's activities sound impressive, but probably are not going to have a big effect on global warming as other than the tradable carbon market, AIG is focusing on understanding risks better and pricing them more accurately. Travelers approach looks like a marketing campaign, but it is not clear if "greens" drive more safely than "browns". The one which seems to make a bit of sense is the program by Firemans Fund to reduce premiums (due to lower expected loss costs) for green buildings. However, the green buildings according to the Risque-wife are "wicked" expensive. Evidently there are only 500 of these certified green buildings --in part due to their expense. So, whether there is any large effect on climate change it is not likely to be testable.
I wonder what is driving this insurance/global warming linkage. I am in favor of the industry pricing risk better but it is not likely to be a source of a social subsidy for high cost low carbon project unless the projects have a lower risk of loss.