In a report commissioned by the New York Department of Financial Services ("NYDFS") titled: "An Analysis of New York Domestic Insurers' Exposure to Transition Risks and Opportunities from Climate Change," independent analysts found that New York domestic insurers' portfolio investments had "meaningful exposure" to carbon-intensive sectors. The analysis was undertaken following NYDFS' March 25, 2021 Proposed Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change.
Additionally, the analysts concluded that:
- the five-year forward-looking capital plans of most insurers in?carbon-intensive sectors do not align with the Paris Agreementmodel, except for those in natural gas production, natural gas-fired power generation and electric vehicle production;
- insurers' portfolios were in many instances less aligned with the Paris Agreement model than market benchmarks;
- life insurers generally had greater exposure to carbon intensive sectors; and
- insurers are exposed to greater transition risks when they underinvest in low-carbon technologies.
The authors conclude that insurers can mitigate their risk by, among other strategies, setting climate-related investment conditions, divestments, and creating certain investment exclusions.
Primary Sources
- NYDFS Press Release: Superintendent Lacewell Announces New DFS Report on New York Domestic Insurers' Exposure to Financial Risks Arising from the Low-Carbon Transition
- NYDFS Report: An Analysis of New York Domestic Insurers' Exposure to Transition Risks and Opportunities from Climate Change
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
