After another year full of unpleasant surprises, you’d think the insurance sector would be ratcheting up its response to big risks like climate change. The U.K. industry has about $15 trillion of assets under management, so the potential to play a significant role in getting others to factor in climate change looks substantial. A new initiative in London is showing the global industry how to go about it.

ClimateWise was launched in 2007 by the Prince of Wales. His view was that “if insurance companies could take a strategic view across all aspects of what they do and look at climate change as part of their whole business, it just might make a difference. There can be few other sectors which are so directly affected by climate change and no other sector takes a longer term or more carefully calculated view of future risk.”

ClimateWise interpreted this brief in a set of principles for sectoral action: take the lead in risk analysis; impart their learning to both policy makers and customers; build climate change into their investment strategies; get their own house in order; and report progress transparently.

Since then, 41 insurance companies with around 50 percent of the U.K. insurance market have signed up to the principles, from giants like AIG and Aviva all the way down to specialist underwriters with fewer than 50 employees. A year in to the initiative, ClimateWise Chair Andrew Torrance commissioned my organization, Forum for the Future, to evaluate its progress.

There’s some good news. Most leading insurance companies do indeed now focus on the climate agenda. Some of the big players including Lloyds of London and the Insurance Information Institute have set up the Catastrophe Modelling Forum, bringing expertise from scientists at Harvard Medical School and elsewhere to bear on how best to anticipate and manage impacts such as those from drought. With an estimated cost of $6 billion to $8 billion, this is the big one, but the Forum is also looking at the way climate change will accelerate the spread of pests, animal disease, floods, and coral bleaching, all with massive potential costs; and at potential mitigation measures from new building codes to estuary protection schemes.

Many members are also providing insurance for clean-tech products and services, a vital link in the development chain. And most are encouraging their customers to think harder, with bespoke products and services that help reduce emissions. Co-operative Insurance has developed a climate-change tracker that shows likely changes in temperature and rainfall up to 2080, with tips for customers on how to reduce their own impacts. And ‘MORE TH>N,’ RSA’s insurance business, is offering Green Wheels, a GPS-based package that monitors driving style and presents it back to drivers to encourage behavior change.

Other areas show less progress. It’s still worryingly early days for some on managing their own direct impacts, and with some providing little information on what they’re doing, transparency needs more attention too. Fewer than half of the companies surveyed claim any progress on building climate change into investment strategy, or into their assessments of company performance or shareholder value, leaving them vulnerable to unknown future liabilities of carbon-intensive businesses.

There’s only so much the industry can do to translate these risks borne by us all into products that it can sell. Ultimately regulation — on energy efficiency or climate resilience — will have to join the dots. But insurers can be an important part of helping companies connect this important threat to their own operations, and manage the risks that result. As such, ClimateWise is already adding value, and has the chance to become a big success. Andrew Torrance has committed the initiative to widen its membership and deepen their engagement next year. As the Prince puts it in his introduction, “We are all in this together, and for the sake of our children and grandchildren, together we must act — and fast.”

Will 2009 see insurers respond accordingly? With some important parts of the industry in the news for all the wrong reasons in the last few months — AIG and Aviva included — the financial turbulence blighting the sector could easily blow the industry further off course. But adverse financial conditions won’t make climate change go away, and don’t lessen the need to understand the real cost of living in a carbon-intensive economy. Amid the chaos, the City has a chance to systematically rethink risk and, in doing so, perhaps begin to rebuild its tarnished reputation as a global leader.