Wednesday, May 15, 2013
When you are on the hook to pay for it
You tend to look very carefully at something and make a sound, reasonable judgement of the situation. That is the case with insurance companies and climate change. And they believe that it is a serious problem that will cost them dearly in the near future and beyond if nothing is done.
If there were one American industry that would be particularly worried about climate change it would have to be insurance, right?Surprisingly, the companies have yet to take any actions beyond localized efforts ant disaster mitigation. They apparently see the big picture but have also failed to act on the big picture. Insurance companies are nothing if not conservative, until the losses pile up.
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.”
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