Insurers Unprepared for Global Warming
Most insurers are not prepared for climate change, according to a new study released by Ceres.
“Insurers invariably pay a big chunk of the losses from these changes in our climate,” said Mindy Lubber, president and CEO of Ceres, in a conference call sponsored by The Climate Reality Project. “They are substantial, and they are everywhere.”
According to the study, of 184 insurance companies doing business in California, New York or Washington state, only 23 were preparing to deal with global climate change; of those, 13 were based overseas.
Global warming is already beginning to make its effects felt, with more extreme weather events having an impact around the world. From droughts in Australia and the American South to unusual, catastrophic storms like Superstorm Sandy, it is becoming increasingly hard to ignore the dangers of a warming planet. In 2012, insurers paid out $58 billion in losses due to weather events, the second-highest on record. The largest loss also came within the last decade, in 2005.
Nevertheless, most insurers are still not preparing for climate change, which could ultimately cost them trillions of dollars.
“Many of them are fumbling in the dark, pricing risk with out understanding it,” said Charlene Leurig, who prepared the report for Ceres. Leurig said some insurers still doubt the reality of climate change.
“Companies including Allstate and The Travelers are expressing skepticism of climate change,” Leurig said.
Leurig said that not all insurers are dragging their feet. Reinsurance giants Munich Re and Swiss Re have been active in arguing for policy changes to mitigate the damage done by climate change, and Nationwide Insurance is factoring climate risk as part of its underwriting process.
Unfortunately, many of the insurers who are aware of global climate change are reacting by moving away from areas that are susceptible to climate change.
“We’re seeing an insidious trend of companies actually leaving markets, like Florida,” said Leurig. In that state, the State of Florida is now the largest insurer, putting taxpayers at risk should disaster strike.
While the insurance industry is not on the verge of bankruptcy, Leurig said that looking long-term, insurers could find themselves cash-strapped, and property-owners could find themselves unable to get insurance if they live in a high-risk area.
There is no doubt in the scientific community that global warming is real, and that it is caused by humans. A recent study indicated that the global average temperature is now warmer than at any time in the past 11,000 years — a period that covers the rise of civilization from the agricultural revolution to the modern era.
It is all but certain that the planet will continue to warm for some time. Even if the world went carbon-neutral tomorrow, carbon already in the system makes it likely that the world will warm another 2 degrees Celsius over the next century; as carbon emissions are still increasing, it seems likely the temperature increase will be much worse.
Photo: U.S. Geological Society/flickr