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May 15 News: Insurance Industry ‘Heavily Dependent On Scientific Thought,’ See Rising Climate Costs

By Ryan Koronowski on May 15, 2013 at 9:44 am

"May 15 News: Insurance Industry ‘Heavily Dependent On Scientific Thought,’ See Rising Climate Costs"

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The insurance industry believes climate change is a serious threat to people and property, yet only some companies advocate climate solutions. [New York Times]

If there were one American industry that would be particularly worried about climate change it would have to be insurance, right?

From Hurricane Sandy’s devastating blow to the Northeast to the protracted drought that hit the Midwest Corn Belt, natural catastrophes across the United States pounded insurers last year, generating $35 billion in privately insured property losses, $11 billion more than the average over the last decade.

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.

Alaska politicians wrestle with the impacts of climate change while adhering to recent policy conversions to not acknowledge the causes of climate change. [Guardian]

Secretary Kerry regrets that the U.S. has not done more on climate change. [The Hill]

The vaunted Thames flood barrier system may become overwhelmed by rising sea levels and flooding by the end of the century. [Guardian]

A new IEA report sees U.S. oil and gas production rising this decade, fueling the fossil fuel dependency of developing nations and giving short shrift to the climate impacts. [CNBC]

The European Union’s civil aviation body faces a September deadline to reduce global airline emissions, with little progress thus far. [Reuters]

Despite calls for no oil development in the fragile region, the Arctic Council added 6 new members, signing an oil spill disaster treaty acknowledging that there would be increased economic development and shipping. [New York Times, Bloomberg]

A new report from the Revenue Watch Institute finds that governments dependent on mining and oil-and-gas production face more corruption and government mismanagement. [The Hill]

NJ Governor Chris Christie has been active in responding to Superstorm Sandy but labels the cause of the storm “esoteric” which conflicts with his first-term environmental commitments. [Washington Post op-ed]

New research links the high suicide rate of North Carolina with coal-fired power plant pollution. [CleanTechnica]

Sulfur dioxide (the pollutant) does not seem to block the sun’s rays as much as previously thought. [LA Times]

Senator Jim Inhofe introduced legislation calling for increased oil drilling to offset Iranian oil, which would be difficult given the realities of the global oil market. [The Hill]

Billionaire environmentalist Ted Turner and coal-based utility Southern Co. are jointly purchasing five solar projects, significantly increasing the utility’s solar power investment portfolio. [Bloomberg]

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12 Responses to May 15 News: Insurance Industry ‘Heavily Dependent On Scientific Thought,’ See Rising Climate Costs

  1. Mike Roddy says:

    The insurance industry also writes policies for fossil fuel companies. They do not risk alienating customers.

    The other issue is that more disaster claims mean higher rates. Just as a store passes on higher wholesale costs, the insurance industry will do the same with claims. Laying off big policies with reinsurance will get dicier, but the companies have always managed a way to do that before, and their underwrites, obviously, are talented.

    • Merrelyn Emery says:

      There are some parts of Australia now where nobody will ensure the properties, ME

  2. Will Fox says:

    This sounds too good to be true…

    “SheerWind claims its INVELOX wind turbine produces 600% more power”

    http://phys.org/news/2013-05-sheerwind-invelox-turbine-power.html

  3. Joan Savage says:

    Raising insurance rates has several kinds of limits.

    In the NYT article Porter reports,”Mr. Muir-Wood notes that the insurance industry faces a different sort of risk: political action. “That is the biggest threat,” he said. When insurers canceled policies and raised premiums in Florida in 2006, politicians jumped on them.”

    A more prudent defense against an insurance company wipe-out is to merge into a larger customer pool that extends beyond the high-risk locales. This measure helps with cash flow, as well as with rate rise rebellion. In 2011, over twenty percent of insurance in the US was carried by five insurance groups (NAIC report, page 3).
    http://www.naic.org/state_report_cards/report_card_wa.pdf

    That is also the basic financial mechanism behind federal flood relief, relying on taxpayers across the country to pick up the tab for regional events.

    Accelerated climate change kicks this strategy to its limits, as regional catastrophic events grow geographically larger and thus more expensive, pushing even the federal government’s preparedness to pay off, as we saw a few months back with Hurricane Sandy.

    Private insurers aren’t ready to throw in the towel, but I expect they are going to lobby for more instruments that are like federal flood insurance and crop insurance to cover catastrophes, even if the private insurers aren’t ready to commit their voices on preventive measures.

  4. prokaryotes says:

    ‘Fish Thermometer’ Reveal Impact of Climate Change

    warmer global temperatures have been affecting the world’s oceans and fisheries for some 40 years.

    They used known temperature preferences of fish and other marine species as a sort of “thermometer” to gauge the extent of the change, and they saw a gradual migration of fish species away from the equator into cooler, deeper waters. http://www.voanews.com/content/fish-thermometer-reveals-longstanding-global-impact-of-climate-change/1661657.html

  5. Daniel Coffey says:

    Insurance companies assess risk and charge premiums sufficient to make a profit. When risks get big enough, the insurance industry withdraws from the area or market. More important, as perceived risks rise profits increase because greater premiums are viewed as justified by company and customer. This means they can do better as perceived risks increase.

    • Mulga Mumblebrain says:

      Private insurance corporations must maximise profits, as their first and greatest priority. Comprehensive social insurance, against all calamities, provided by the Government, through hypothecated taxation would be infinitely superior, but it’s not allowed, is it?