Three British insurance companies have been reported to the Financial Conduct Authority (FCA) for failing to disclose climate change risks in their annual reports.
Admiral, Lancashire Holdings Limited and Phoenix Group Holdings could now all face fines as a result of the complaints, and may be forced to publish information to rectify their omissions.
The firms could also endure significant reputational damage, with insurers coming under increased public pressure to stop underwriting the fossil fuel sector.
Stephanie Morton, insurance lawyer at ClientEarth, which reported the firms to the FCA, said it was important to disclose the "myriad of climate change-related risks" to investors.
"Without this information, how can investors make a fully-formed investment decision?" she continued.
"We think the law is quite clear on this, and by omitting financially material climate risks from their annual reports, these companies are not giving the full picture. "
ClientEarth highlighted how insurance companies are exposed to physical, transitional, reputational and liability risks.
Physical threats are likely to result in more claims and a fall in asset values, while transitional risks are caused by new technologies, changing consumer behaviour, and government policy.
If losses are suffered as a result of climate risks, insurance companies could also find themselves on the hook for third-party liability claims against their corporate customers.
The FCA recently published a list of steps it is taking with regard to climate change-related disclosures, saying firms must report how these affect valuations and how they are managed.
"The FCA has moved swiftly this year in understanding the risks that climate change presents to the economy," Morton continued.
"This is an opportunity for the FCA to send a strong market signal that climate disclosures are essential for enabling investors to assess climate-related financial risks."
Sign up to our free newsletter here and receive a weekly roundup of news concerning the actuarial profession