The Travelers Companies Inc: Disclose Climate Transition Plan

December 3, 2024 As You Sow

WHEREAS: The United States is facing a climate-related insurance crisis, which is beginning to create instability in many housing markets.[1] National insurance underwriting losses have risen dramatically, reaching a 10-year high of $38 billion in 2023, primarily due to climate-related factors including more frequent and intense weather related natural disasters and storms, reinsurance price increases, and related inflation.[2] To stay profitable in the face of increasing catastrophe losses, insurers have increased premiums nationwide and are excluding coverage in high climate-risk jurisdictions,[3] leading to lack of insurance coverage in significant areas across the nation.

Travelers, one of California's largest home insurers, is no exception: its catastrophe losses increased from $1.85 billion in 2021 to $2.99 billion in 2023.[4] In response, Travelers requested approval this year to increase California rates by an average of 15% and dropped policies in risky markets.[5] Yet, despite ever-growing climate-related losses, Travelers continues to invest in and underwrite high carbon emitting companies, accelerating climate impact. Travelers’ current fossil fuel investments have reached $1.906 billion.[6]

Increasing insurance rates and reduced insurance coverage in high-risk markets transfers the financial burden of climate change to policyholders, investors, and taxpayers.[7] With nationwide insurance premiums increasing 34% between 2017 and 2023[8] — a rate 40% higher than inflation[9] — the number of Americans unable to afford insurance is increasing. These 6.1 million uninsured households represent $1.6 trillion in property value at risk.[10]

As Travelers’ cancellations grow and climate-related rate increases outprice its customer base, it is unclear how Travelers will successfully maintain its homeowner business line, which makes up 50% of its personal insurance business.[11]

In Traveler’s TCFD climate risk discussion, Travelers notes it can reduce growing climate risk by annually adjusting its pricing and policy conditions — that is, by raising rates and reducing coverage.[12] However, Travelers fails to explain if or how it can retain sufficient homeowners’ policies to remain profitable as it makes these adjustments. Already, state-run residual plans are absorbing $1 trillion in risk and policies that would previously have been covered by private insurers.[13]

BE IT RESOLVED: Shareholders request that Travelers provide, in its existing climate reporting, the expected impact of climate-related pricing and coverage decisions on the sustainability of its homeowners’ insurance customer base under a range of climate scenarios in the near, medium, and long-term.

SUPPORTING STATEMENT: At management discretion, shareholders suggest Travelers address, for each time frame, the:

Projected percentage of policies not insurable due to climate risk;
Projected climate-related policy non-renewals and rate increases;
Related profitability impact;
Risks to Travelers and its investments from associated climate-related municipal bond and housing market bubbles.

[1] https://www.cbsnews.com/news/insurance-policy-california-florida-uninsurable-climate-change-first-street/; https://yaleclimateconnections.org/2023/04/bubble-trouble-climate-change-is-creating-a-huge-and-growing-u-s-real-estate-bubble/

[2] https://www.insurancejournal.com/news/national/2024/03/07/763884.htm

[3] https://www.ft.com/content/7745d8ba-d498-4b1c-b877-e42a691b954f

[4] https://sustainability.travelers.com/iw-documents/sustainability/Travelers_TCFDReport2023.pdf, p.28

[5] https://californiaglobe.com/fr/travelers-insurance-announces-that-home-insurance-rates-are-to-go-up-by-15-starting-in-june/

[6] https://investinginclimatechaos.org/data

[7] https://www.finance-watch.org/wp-content/uploads/2024/03/Report-Transition-Planning-for-Insurers-Finance-Watch.pdf, p.8

[8] https://www.insurancejournal.com/news/national/2024/09/26/794409.htm

[9] https://www.newyorker.com/news/the-financial-page/the-home-insurance-crisis-that-wont-end-after-hurricane-season

[10] https://climateandcommunity.org/research/insurance-financial-stability/

[11] https://www.sustainability.travelers.com/iw-documents/sustainability/Travelers_TCFDReport2023.pdf, p.13

[12] https://www.sustainability.travelers.com/iw-documents/sustainability/Travelers_TCFDReport2023.pdf, p.23