Adding Up the Losses from Hurricanes and Extreme Weather

Hurricane season has ended this year. Thankfully there were no Katrinas, which caused over $50 billion in insured losses.

We were fortunate to have a relatively typical Atlantic hurricane season with the number and duration of storms “very close to the averages one expects for an Atlantic hurricane season.” This was thanks to a confluence of unusual factors — including a “rapidly growing El Nino” that typically makes it hard for Atlantic hurricanes to form.

But while individual hurricane seasons are difficult to predict because of such factors, the trend is clear: Hurricane Katrina is exactly the kind of extreme weather event we expect to see more and more of thanks to our inaction on climate change. And sea level rise will only complicate efforts to protect coastal cities from major hurricanes.

A recent article in Plenty magazine weighs in on the “risky business” that will continue to confront the insurance industry as climate change feeds extreme weather conditions. Two reports (here and here) conclude that insurance companies are not appropriately preparing for the environmental and health consequences of climate change.

Many insurers have cancelled coverage in high-risk regions, but the industry’s policy of abandonment hardly addresses the issue, and while companies run risk models to analyze data, the figures are outdated by the time they’re processed and the next storm rolls through. Instead, the reports suggest that insurance companies provide incentives for green building and energy efficient changes and use investments to fund clean technology.

It only makes sense that the world’s second largest industry, which specializes in risk management, should promote the changes needed to attend to the world’s greatest risk.