Insurance industry lagging behind in establishing climate risk committees: Fathom
A new research report commissioned by Fathom and conducted by IFI Global reveals that the insurance industry is falling behind in establishing dedicated climate risk committees, suggesting that firms would benefit significantly from adopting them to strengthen climate risk management.
The findings are based on data from annual and ESG reports of 92 major companies, including 30 insurance firms, 30 banks, and 32 investment firms, along with interviews with 42 CEOs, board members, and senior managers who shared insights on challenges, opportunities, and evolving practices in climate risk.
Key findings show that only 30% of insurance firms have a dedicated climate risk committee, lagging behind banks (63%) and closely trailing investment management firms (31%).
Among those with committees, insurance firms are most likely to value objective oversight, with 80% of their climate risk committees remaining independent from the board, compared to 73% in banks and 72% in investment firms.
Despite traditionally focusing on short-term risks, 70% of insurance firms now consider climate risk a central concern, just behind investment management (72%), while only 50% of banks share the same view.
The research also highlights that 81% of interviewees cite a lack of accurate and consistent data as the greatest challenge in managing climate risk. However, only 43% of insurance firms utilise external toolkits or expertise for climate risk assessments, compared to 56% of investment management firms and just 17% of banks.
Harry Vardigans, Head of Insurance at Fathom, commented, “This research highlights a significant opportunity for the insurance sector to enhance its climate risk management. Insurance firms would greatly benefit from establishing dedicated committees and improving their data resources to better integrate climate risk into their strategies.”
He added, “Ultimately, robust governance in the insurance sector can lead to more resilient business practices and a competitive edge in an increasingly climate-conscious market.”
Simon Osborn, CEO at IFI Global, noted, “Climate risk is multi-dimensional. This puts it into a different category from all the other risks that boards have to address. The results of this research suggest that, due to its complexity, those responsible for the governance of the financial industry haven’t yet found an approach to tackling climate risk that they are fully satisfied with.”
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