US state regulators must step in and require insurers to cut their exposure to fossil fuel industries, a consumer rights lobby group has said, accusing insurers of abandoning customers in pursuit of short-term profits.

In response to a report by the US Treasury Department’s Federal Insurance Office this week which found the country’s existing insurance supervision of climate risk is “fragmented”, Public Citizen urged regulators to accelerate their efforts to investigate the risk in insurance. According to the report, the US suffered over $165bn in total economic losses from climate-related disasters last year, of which insurance covered only about 60%.

Carly Fabian, insurance policy advocate for Public Citizen’s climate programme, said: “The report sends a strong signal to state regulators across the country that they need to move quickly to assess growing climate-related financial risks to the insurance sector.”

The report found that increased climate-related risks could cause market disruptions and have “adverse implications” for the availability and affordability of insurance coverage in certain markets.  

Fabian criticised insurers for not doing enough to mitigate the risk because of their investment and underwriting support for the fossil fuels industry.  

She said: “As insurance companies continue to invest in and underwrite fossil fuels while abandoning homeowners in vulnerable areas, it’s increasingly clear that the industry is willing to harm its customers and undermine its own markets in pursuit of short-term profits. Regulators must step in and require insurers to mitigate the risk by reducing their financed and insured emissions.”

She then pointed to the FIO, saying that the Office should accelerate its efforts to identify trends in the protection gap. 

“FIO should move forward quickly… to identify trends in the availability and affordability of insurance and assess their effects on consumers and potential threats they could pose to financial stability.”