Climate Denial Crock of the Week

Politico:

Insurers are already on the front lines of climate change. Now they’re getting their turn on the front lines of the anti-ESG movement.

Lawmakers in red states like Texas, North Dakota and South Dakota are trying to bar insurers from weighing environmental, social and governance factors in writing policies.

On the other side, activist shareholders and blue states are trying to limit insurers’ investments and underwriting in oil and gas projects. A bill introduced last month in Connecticut would establish a surcharge on insurers that underwrite fossil fuels.

For an industry that’s based on evaluating and pricing risk, it’s all a little rich.

“ESG is in the DNA of any insurance company,” said Michel Leonard, chief economist and data scientist at the Insurance Information Institute. “It would be very difficult for the insurance industry to insure in an economically viable and sustainable way without paying attention to environmental patterns.”

Republicans are using the same argument as they have in their attacks on other firms in the financial services industry — that ESG risks aren’t material to companies’ bottom lines and are instead a political calculation designed to appeal to the left.

“We don’t want to destabilize the entirety of the insurance industry by injecting a bunch of non-actuarially sound principles,” said Texas Rep. Tom Oliverson, vice-chair of the state House’s Republican caucus, who has introduced a bill to bar insurers from considering ESG scores or diversity, equity and inclusion factors when setting rates.

The insurance industry is resisting, arguing that such legislation undermines their business practices and could prompt the sort of instability that Oliverson is warning about. Insurers note that considering climate risk helps them deal with things like stranded assets and high costs for disaster cleanups. And they regularly consult things like credit ratings and ESG scores that account for such risks — 85 percent of global insurers believe ESG will impact all functions of their business, according to a recent survey from PwC.

Doug Abraham, a lobbyist for the APCIA, testified last month against a South Dakota bill that would bar financial companies and insurers from denying services to someone using anything other than “impartial risk-based financial standards,” arguing that it would boost insurance rates across the state and cause insurers to go bankrupt.

The APCIA also opposes the Connecticut bill, writing in public comments that “states shouldn’t be using tax policy to try to prevent insurance coverage for disfavored industries.” The group warned that the legislation could also hurt people’s ability to recover damages from the fossil fuel companies that would be affected.

“Do we find it chilling when we see these laws? Well, we find it confusing,” Leonard said. Industry confusion “could turn very rapidly to severe significant concerns,” he said, if the bills passed and were interpreted to prevent looking at weather patterns. “Then we would be wondering whether we can even keep insuring in some of those markets.”

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Below, Josh Pearce PhD on the fossil fuel industry’s risk exposure.