As Climate Crisis Upended Homeowners Insurance, the Industry Resisted Regulation

In the wake of the devastating wildfires in Los Angeles in January 2025, the effect of climate change on the insurance industry was detailed in a report by the U.S. Treasury Department. In what it called the most comprehensive snapshot of the homeowners insurance market to date, the agency wrote in its press release that “homeowners insurance is becoming more costly and harder to procure for millions of Americans as the costs of climate-related events pose growing challenges to insurers and their customers alike.”

Researchers including those at the Harvard Business School echoed that conclusion: “Climate change is causing turbulence in homeowner insurance markets, as a growing number of extreme weather events dramatically drive up costs.”

In 2024, there were 27 confirmed weather and climate events in the U.S. each with losses exceeding $1 billion, according to the National Oceanic and Atmospheric Administration.

But insurance industry groups have resisted supporting climate regulations by questioning the link between higher premiums and climate change, according to a new report from InfluenceMap, a transparency advocacy nonprofit.

The group concluded that “industry groups questioned the climate risk implications for the insurance sector, asserted that insurers have proven they can sufficiently manage climate risks, and posited that natural catastrophe events are not frequent enough to require additional guidance or regulation.”

Industry representatives expressed such views during a process to shape the guidance being developed by the International Association of Insurance Supervisors, an organization of insurance supervisors and regulators who oversee 97% of the world’s insurance premiums. 

As disaster costs have risen in recent years, the association identified climate risk as a major theme and led four public consultations in 2023 and 2024 on proposed changes to international guidelines for the industry so that regulators could better incorporate climate risk into their supervision of the sector, InfluenceMap reported. 

Some of the largest insurance industry associations in the world — the American Property Casualty Insurance Association, the National Association of Mutual Insurance Companies, the Institute of International Finance, the Global Federation of Insurance Associations, the Life Insurance Association of Japan, Insurance Europe, the General Insurance Association of Japan and the U.S. Chamber of Commerce — were involved in the discussions.

In their responses, most “downplayed the systemic risk climate change poses to the insurance industry and suggested that additional risk is unnecessary,” according to InfluenceMap’s report. 

In its response to an early consultation, the U.S. Chamber of Commerce said, “We question the implication that climate change is currently a financial stability risk to the insurance sector.” 

The Global Federation of Insurance Associations questioned whether the frequency of natural disasters required a change in insurers’ business models. “These events occur reasonably rarely, so it would be a waste of resources to scale up permanently waiting for the next one to occur,” it said, according to InfluenceMap’s report. 

When the International Association of Insurance Supervisors suggested that insurers could be required to consider the potential effects of climate change in their investments, as well as how those investment decisions could negatively affect climate change, the groups pushed back. None of the industry groups examined by InfluenceMap supported incorporating climate factors into their investment activities. Among them was the Institute of International Finance and Insurance Europe, whose members include Allianz, Swiss Re and Zurich Insurance Group.

Insurance Europe found the proposal “quite prescriptive” and the Global Federation of Insurance Associations questioned why climate-related risks should be considered systemic. 

“It is unclear why [significant investment exposure to assets that are vulnerable to climate-related risks] is characterized as ‘systemic risk.’ … Moreover, it would seem appropriate for insurance supervisors to be equally cautious about concentrations in ‘green’ investments.” 

At least one of the groups, the Life Insurance Association of Japan, took supportive positions on the proposed climate guidance. And in a response emailed to Capital & Main, Yuji Nitta, a spokesperson for the group said that it “remains committed to supporting the [International Association of Insurance Supervisors’] efforts to address climate-related risks.”

Some leading voices at the insurers have different views. Allianz SE board member Günther Thallinger recently said that climate change is a “systemic risk that threatens the very foundation of the financial sector.” 

Thallinger said that “if insurance is no longer available, other financial services become unavailable too. A house that cannot be insured cannot be mortgaged.” He added: “This is a climate-induced credit crunch.”

The discussions resulted in an International Association of Insurance Supervisors paper in April 2025 on the supervision of climate-related risks in the insurance sector. 

In the end, its suggestions included “supervisory oversight of corporate governance and board knowledge of climate risk, and methods for insurers to consider climate when assessing existing risk categories,” as well as  proposals that supervisors “consider the potential impact of climate change on insurers’ investments and require insurers to effectively disclose climate-related risks and conduct forward-looking scenario analysis,” according to InfluenceMap.

Representatives for the International Association of Insurance Supervisors and many of the industry groups named in the report did not respond to Capital & Main’s requests for comment

Kristina Belesova, a spokesperson for Insurance Europe, wrote in an email response, “Insurance Europe has been crystal clear that climate change is a real threat that requires urgent action.” She pointed to the firm’s latest annual report.  

“Our contributions to bodies such as the [International Association of Insurance Supervisors] reflect our views about the respective roles supervisors and supervised entities have to play in the fight against climate change,” Belesova added. “We are open to discussing those views, but there can be no doubt that the insurance sector sees tackling climate change as a priority and is willing to play its part.”

Speaking on behalf of the Global Federation of Insurance Associations, Belesova referred to its official response to the International Association of Insurance Supervisors.

Marie Therese Bitterlich, a spokesperson for the International Association of Insurance Supervisors responded by email and emphasized that the responses of some insurers didn’t result in any “material changes” to the final version of its report.

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