New combatant against global warming: insurance industry

In fact, the industry is not driven just by an attempt to help the environment: It also wants to make money. In Travelers' case, the impetus to give a policy discount on hybrid cars came when Greg Toczydlowski, a senior vice president of product management, was gassing up his wife's Ford Excursion.

"A hybrid zipped in and out while I was still pumping, and it occurred to me it takes so little gasoline and runs so much longer on a tank," says Mr. Toczydlowski. "I came back and did research on how many hybrids are out there and what's the profile of the customer. We discovered it was a preferred customer – middle-aged, very responsible, and stable financially."

Now hybrid owners, besides saving on their fuel bills, can save money on their auto insurance – about $100 a year, according to Travelers.

The attention on climate change is likely to receive a boost from state insurance regulators, who had planned to discuss its risks in September 2005 in New Orleans, at their annual meeting. Hurricane Katrina intervened, however, and the meeting was moved to Chicago.

"As a result, regulators spent an enormous amount of time on climate change and what changes to promulgate to make sure the companies are financially sound," says Mindy Lubber, president of Ceres, a coalition of investors, environmental groups, and public-interest organizations in North America.

Ceres has made two reports on what the insurance industry can do to profitably manage climate change. In a report issued in August, Ceres details some steps currently under way, such as Swiss Re's investment in new solar technology, Munich Re's insurance renewable energy projects, and Lloyds of London's insurance on predicted energy savings.

In the US, one of the more unique and potentially far-reaching efforts will be rolled out this fall by Fireman's Fund. After a building is damaged, Fireman's will specify that it must be repaired with "greener" materials, including consumer electronics that must have Energy Star ratings from the Environmental Protection Agency. If a building is a total loss, it will be rebuilt as a "green" building. The insurer also plans to pay for an engineer to make sure ventilation systems and boilers are installed properly, which could also save energy.

"All the evidence suggests [that] if you decrease energy usage in a building, the owner's net operating income increases and you will improve the asset value," says Steven Bushnell, product director of Fireman's, owned by Allianz.

Insurance companies, adept at managing risk, are also trying to educate their customers. Marsh and Yale will train 200 board directors to understand risks of climate change. Again, part of the motivation is money: Insurance companies provide liability insurance for board members.

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