Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }

What are we looking for?

How well North America’s top property and casualty insurers are prepared to withstand climate-related disasters.

The screen

In its 2019 annual Financial System Review, the Bank of Canada for the first time explicitly addressed climate change, listing it as one of six major vulnerabilities in the Canadian financial system. In the report, it cites that insured damage to property and infrastructure in Canada averaged about $1.7-billion a year from 2008 to 2017, up from $200-million annually from 1983 to 1992.

The United States has experienced record-level destruction from hurricanes, cyclones and wildfires in recent years. According to risk modelling firm Air Worldwide, a hurricane as destructive as Harvey, the costliest ever for the U.S., would have been seen as a one-in-2,000-year event in the last century. By 2017, the year of Harvey, that estimated frequency had risen to one in 300 years.

Story continues below advertisement

The compounding effects of climate-related disasters can create a perfect storm for insurers. First, natural disasters cause drastic spikes in claims, so insurers have to liquidate assets in order to make good on these claims. Second, the combined effect of a number of insurers selling all at the same time can have a significant depressing effect on asset prices, just when insurers need them the most in order to remain solvent.

Finally, the prices of these assets – securities issued by companies and governments – are directly affected by the same natural disasters. Companies’ operations are interrupted and governments’ budgets are strained with relief spending.

We will look at the five largest North American insurance companies in the property and casualty or multiline (insurance for multiple risks bundled together) businesses and see how they compare in terms of 1) their financial strength to withstand disasters and 2) evidence of understanding the risks that climate change poses.

The first criterion is easier to quantify. We look at the forward estimate of loss ratio (that of claims paid to premiums collected); combined ratio (claims paid plus expenses to premiums collected); and catastrophic loss ratio (losses related to severe events as a percentage of premiums).

The second aspect is less straightforward. As proxies we look at: whether management has explicitly acknowledged the commercial risks associated with climate change; and whether the company reports sustainability data within the guidelines of the Global Reporting Initiative (a standards organization founded by the United Nations). We also look at whether the company has set emissions reduction targets and what the percentage change in their (voluntarily) disclosed emissions has been over the past three years. Greenhouse-gas emissions are more commonly associated with energy companies, but virtually all companies, including insurers, emit GHG – from company cars that pollute to office buildings and servers that require energy associated with GHG emissions.

More about Refinitiv

Refinitiv, formerly the financial and risk business of Thomson Reuters, is one of the largest providers of financial markets data and infrastructure, serving more than 40,000 institutions worldwide. With a dynamic combination of data, insights and technology, as well as news from Reuters, our customers can access solutions for every challenge, including a breadth of applications, tools and content – all supported by human expertise.

What we found

The five largest are all U.S. firms (Canada’s three largest are classified as life and health insurance). Hartford Financial Services Group Inc. has the lowest combined ratio, suggesting, all else being equal, it should have the highest profitability and be most resilient to catastrophes, be they severe weather events resulting from climate change or otherwise.

Story continues below advertisement

Hartford also shows the most signs of appreciating the risks climate change poses. In its annual GRI report the company commits to at least a 2.1-per-cent reduction in greenhouse-gas emissions annually – which would lead to at least a 26-per-cent reduction by 2027 – a target it is well on its way to achieving if the reduction achieved over the past three years is any indication. These emissions data are verified by an independent third party, Montreal-based WSP Global Inc., and Hartford has also set the goal of being powered 100 per cent by renewable energy by 2030.

The second-lowest combined ratio belongs to American International Group Inc. AIG has committed to a 30-per-cent reduction in emissions by 2023. It should be noted, however, that AIG only reports on emissions from its British and New York operations, and reported emissions do not include business travel “due to the complexity of aggregating the data," according to the company.

Select North American insurance companies

CompanySymbolTRBC*Mkt. Cap. (US$ Mil.)Loss RatioCombined RatioCatastrophic Loss RatioClimate Chg. Comm. RisksGRI ReportingEmission Reduction Tgt.Emission Tgt. Year3Y Emissions Chg.Div. Yld. NTM (%)1Y Rtn (%)Recent Close (US$)
American Int'l Group Inc.AIG-NMultiline Insur. & Brokers48,85463%87%3%Yesn/a30%2023n/a2.517.553.97
Travelers Companies Inc.TRV-NProperty & Casualty Insur.38,53765%96%5%Yesn/an/an/an/a2.414.7141.36
Allstate Corp.ALL-NProperty & Casualty Insur.35,49767%94%8%YesYes20%2020-15%1.913.7108.41
Hartford Financial ServicesHIG-NMultiline Insur. & Brokers21,85864%86%4%YesYes26%2027-42%2.229.559.00
Cincinnati Financial Corp.CINF-QProperty & Casualty Insur.18,90865%95%2%Non/an/an/an/a2.055.3115.72

Source: Refinitiv

* Thomson Reuters Business Classification.

Hugh Smith, CFA, MBA, is manager of Refinitiv’s Investment Management business for the Americas, and is a director on the board of the Responsible Investment Association of Canada.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies