Insurance industry pricing climate risk as a dead certainty

Insurance underwriters generally operate in the real world, where science trumps ideology (that's why terrorism insurance is pretty darned cheap -- despite the politically successful posturing of our leaders, terrorism just isn't a very big threat). That's why climate change insurance costs big bucks -- insurers know that it's real, it's coming, and it's really, really bad news.

The difference between the general Big Business propaganda intended to sow doubt about climate science and the cold, hard economic reality of underwriting the risk of climate catastrophe is telling. It's like the Texas Young Earth Creationists who profess a public belief in the 5,000-year-old Biblically accurate planet, but still allow their geoscientists to direct oil-drilling operations in accord with the blasphemous four-billion-year-old Earth. Money talks, bullshit walks.

And the industry expects the situation will get worse. “Numerous studies assume a rise in summer drought periods in North America in the future and an increasing probability of severe cyclones relatively far north along the U.S. East Coast in the long term,” said Peter Höppe, who heads Geo Risks Research at the reinsurance giant Munich Re. “The rise in sea level caused by climate change will further increase the risk of storm surge.” Most insurers, including the reinsurance companies that bear much of the ultimate risk in the industry, have little time for the arguments heard in some right-wing circles that climate change isn’t happening, and are quite comfortable with the scientific consensus that burning fossil fuels is the main culprit of global warming.

“Insurance is heavily dependent on scientific thought,” Frank Nutter, president of the Reinsurance Association of America, told me last week. “It is not as amenable to politicized scientific thought.”

Yet when I asked Mr. Nutter what the American insurance industry was doing to combat global warming, his answer was surprising: nothing much. “The industry has really not been engaged in advocacy related to carbon taxes or proposals addressing carbon,” he said. While some big European reinsurers like Munich Re and Swiss Re support efforts to reduce CO2 emissions, “in the United States the household names really have not engaged at all.” Instead, the focus of insurers’ advocacy efforts is zoning rules and disaster mitigation.

For Insurers, No Doubts on Climate Change [Eduardo Porter/New York Times]

(via /.)

Notable Replies

  1. Yeah, climate change was thoroughly debunked by some guy on Fox News on July 7th, so YEAH Cory, why did you post this?

  2. If you want to see denial at work, check out the Slashdot comment thread on this story.

    Insurance companies are no longer to be trusted, along with scientists, assorted intelligence services, and the the military.

    Senator Inhoffe and Penn & Teller now, gosh, they sure tell it like it is!

  3. snig says:

    The point is, if there were a skeptical company that did not believe that the climate was going to be continually worsening, they could afford to offer cheaper rates than their doom-saying competitors and get all the business. Free market at work. But no one is taking that bet.

  4. Insurance is a market driven business just like any other. If one insurer is a nervous nellie, and raises rates for fears that are unfounded, there will always be another insurer perfectly willing to leave rates be, and enjoy the influx of customers.

    But this isn't just a matter of raising rates. Insurance companies are dismissing entire cities and regions as uninsurable and walking away, expressly because of climate change. I'll reiterate: they are walking away from customers who are willing to pay for insurance, because they think the risks are too difficult to quantify on account of changing climate patterns.

  5. Hey, the exact same two charts again. Rather than go through the exact same discussion, let me simply point out that Nik brought these up on this thread, and some others this one. There you can find what criticisms people like myself had, what answers he gave, and so generally judge if there's merit to what he brings up without repeating it all.

Continue the discussion

29 more replies