Medibank, one of Australia's biggest health insurers, has announced it will dump its holdings in fossil fuel companies amid concern over the health effects of climate change.

In a statement to the Australian Stock Exchange on Monday morning, Medibank said it would transition to low-carbon investments in its international portfolio within the next year, to reflect the global transition to clean energy.

Medibank chairwoman Elizabeth Alexander. Credit:John Woudstra

"We are also committed to exploring a similar approach with our domestic equity portfolio, and so we will be actively encouraging fund managers to develop a suitable product for us that is socially responsible, cost effective and delivers a sustainable investment return," the statement said.

The announcement by chairwoman Elizabeth Alexander preceded the company's annual general meeting in Melbourne on Monday.