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Report: Insurers Not Ready for Climate Change

Despite broad consensus among major insurers that climate change will affect extreme weather events, only an eighth of such companies have formal policies in place to deal with growing climate change risks, according to a report issued today by business sustainability coalition Ceres.

The new report, Climate Risk Disclosure by Insurers: Evaluating Insurer Responses to the NAIC Climate Disclosure Survey (pdf) analyzes what 88 leading U.S. insurers are saying about climate change in public filings with state insurance commissioners – and the extent to which they’re factoring global warming into their business models. Only 11 of the insurers surveyed have climate change policies in place.

Ceres says the report is the first attempt to analyze responses by insurers to a mandatory 2010 survey. The disclosures were filed with insurance regulators in six states: New York, New Jersey, California, Oregon, Pennsylvania and Washington.

Climate change is altering the industry’s global business landscape and threatens to undercut the risk models on which it depends, according to the report. The study was to have been delivered today at a conference of the National Association of Insurance Commissioners, but the meeting was cancelled due to Hurricane Irene.

According to the National Weather Service, before a single hurricane made landfall this year, the United States had already tied its yearly record for billion-dollar weather disasters, and the cumulative tab from floods, tornadoes and heat waves has eclipsed $35 billion.

If insurers don’t respond in a timely way to the business impacts of climate change, the report warns, insurance availability and pricing could be affected.

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11 thoughts on “Report: Insurers Not Ready for Climate Change

  1. It not just the insurers you should be talking to . . . it’s the re-insurers . . . and good luck . . they are the most “private” of groups.

  2. Insurers (& re-insurers) should have every reason in the world to look very closely at this issue and rethink their underwriting; UNEP did a study that found annual claims from climate-change caused losses could reach $1 trillion by 2040.

    The multi-national insurance providers are indeed taking this issue seriously and I suggest looking over activities at the Munich Re/Swiss Re/Allianz groups of the world.

    The lack of uptake amongst US insurance providers is somewhat dismaying. Our group had some contact with NAMIC earlier this year which emphasized that US insurers are making a deliberate point of ignoring/denying human climate change…

  3. It is unlikely that global warming will cause increased extreme weather. If the world warms due to increasing greenhouse gas emissions, temperatures at high latitudes are forecast to rise most, reducing the difference between arctic and tropical temperatures. Since this differential drives weather, we should see less weather extremes, not more.

    It is also a mistake to blame human activities for current weather extremes. For example, the Nongovernmental International Panel on Climate Change (www.nipccreport.com) includes a study published this year about the causes of the 2010 Russian heat wave. Researchers concluded that “it is unlikely that the warming attributable to increasing greenhouse gas concentrations contributed significantly to the magnitude of the heat wave.”

    It is also important notice decreasing trends in extreme weather. For example, we are now near a 30 year low in worldwide “accumulated cyclone energy”* (“hurricanes” in the North Atlantic), something that was not supposed to be happening if the forecasts of climate models were correct.

    Instead of futilely trying to stop extreme weather events, we need to prepare for them by burying electrical cables underground, reinforcing infrastructure and ensuring reliable energy sources so that we have the power to heat and cool our dwellings as needed.


    Tom Harris
    Executive Director
    International Climate Science Coalition (ICSC)
    P.O. Box 23013
    Ottawa, Ontario K2A 4E2


    * PS: This graph shows the trend in accumulated cyclone energy: http://coaps.fsu.edu/~maue/tropical/global_running_ace.jpg, which is described on http://coaps.fsu.edu/~maue/tropical/?p=34.

  4. Mr. Harris – per your last paragraph, with all due respect, it is not an either/or scenario – the picture so many climate change deniers paint ad nauseum. It is: Yes, we need to understand and deal with the human impacts on climate and ramp up our efforts to reduce our energy consumption and development of non-fossil fuel energy alternatives, and in so doing, jumpstart a dead economy. To reinforce this strategy, we should also prepare for these chaotic climate changes by “burying cables, reinforcing infrastructure, and ensuring reliable energy sources”.

  5. The posting by Tom Harris is incorrect in nearly every aspect.

    For example, his assertion that extreme weather is on the decline is just plain wrong. From NOAA (http://www.noaanews.noaa.gov/stories2011/20110817_weatherready.html) comes this quote: “NOAA is also announcing that the United States has so far this year experienced nine separate disasters, each with an economic loss of $1 billion or more — tying the record set in 2008”; and this one: “According to Munich Reinsurance America, one of the top providers of property and casualty reinsurance in the U.S., the number of natural disasters has tripled in the last 20 years and 2010 was a record breaker with about 250. Average thunderstorm losses have increased five-fold since 1980. For the first half of 2011 there have been $20 billion in thunderstorm losses, up from the previous three-year average of $10 billion.”

    And as far as blaming human activities for weather extremes, check here: http://globalchange.gov/publications/reports/scientific-assessments/us-impacts/key-findings. Three ‘key findings’ are identified as 1) “Global warming is unequivocal and primarily human-induced”, 2) “Widespread climate-related impacts are occurring now and are expected to increase”, and 3) “Coastal areas are at increasing risk from sea-level rise and storm surge”. While no single weather event can be unequivocally linked to human activity, the trend is clear. Tom should stop trying to focus on single weather events, and instead open his eyes to the larger undeniable patterns that are emerging.

    Furthermore, NOAA confirms that global warming causes more hurricane activity, not less: “Above-average sea surface temperatures prevailed across the Atlantic and Indian Oceans, with the most dramatic warmth across the tropical Atlantic. This warmth contributed to the heightened activity of the 2010 Atlantic hurricane season as well as to the high risk of coral bleaching across the Caribbean.” (http://www.climatewatch.noaa.gov/article/2011/climate-patterns-2010-temperatures-2).

    With respect to “futilely trying to stop extreme weather events”; we should be spending our efforts to slow, and eventually stop, human contributions to global climate change – a proactive approach to dealing with the true source of the problems. As opposed to reinforcing infrastructure and burying power cables – which are merely reactive measures to cope with an already changing climate that carries increased frequency of large storms and other natural disasters.

  6. Good grief, Doug – we are not talking about losses due to extreme weather events, which are influenced by many socioeconomic factors, not just (or even primarily) the weather event trend itself. We are talking about trends in the actual extreme weather. The links I included above show that hurricanes worldwide are NOT rising with global warming, disproving NOAA’s hypothesis.

    The statement from the government Web site that you cite, ““Global warming is unequivocal and primarily human-induced”, is politically correct nonsense. Of course GW is happening overall if you look at the past hundreds years. But the question is, is the human addition of GHG likely to cause dangerous climate change. There is a great deal of evidence to say no – see the recently released NIPCC, for example at nipccreport.com.

  7. Cathy, I don’t believe that what you propose would do the economy any long term good. Researchers at the Instituto Bruno Leoni in Italy found that, for every green job created, 4.8 jobs were lost in the entire economy, or 6.9 jobs in the industrial sector.

    Similar studies in Spain showed that, for every green job created via Spanish government subsidies, at least 2.2 jobs in the private sector are lost. Researchers at the Universidad Rey Juan Carlos found that, since 2000, Spain spent 571,138 euros on each green job, including subsidies of more than 1 million euros per job in the wind industry.

    Sounds like a bad way to spend our precious resources in my opinion.

  8. Tom: Had you looked more closely at my post, you would have seen some quotes from NOAA that are talking about “trends in the actual extreme weather”. So your ‘good grief’ post is completely senseless. The trend in extreme weather events is exactly what I was talking about.

    Furthermore, extreme weather events encompass far more than just hurricanes. They also include extreme droughts, extreme frequency and intensity of thunderstorms, extreme flooding, etc., etc.

    Additionally, I dispute your claim that “hurricanes worldwide are NOT rising with global warming, disproving NOAA’s hypothesis”‘. Here are the official NOAA statistics for Atlantic tropical storm seasons over the past 30 years, showing ‘year’, ‘# tropical storms’, ‘# hurricanes’, ‘5-year running average of # tropical storms’, and ‘5-year running average of # hurricanes’ (source: http://www.aoml.noaa.gov/general/lib/lib1/nhclib/mwreviews.html):
    2008 16 8 16.8 8
    2007 15 6 16.8 7.8
    2006 10 5 16.2 7.4
    2005 28 15 17.2 8.2
    2004 15 6 14.6 6.8
    2003 16 7 14 7.2
    2002 12 4 13.6 7.8
    2001 15 9 12.6 7.6
    2000 15 8 12.2 7.6
    1999 12 8 13 8.2
    1998 14 10 12 7.2
    1997 7 3 10.8 6
    1996 13 9 10.6 6.2
    1995 19 11 9.6 5.2
    1994 7 3 8.6 4.6
    1993 8 4 9.4 5.4
    1992 6 4 10.2 5.6
    1991 8 4 10.4 5.4
    1990 14 8 10 5.4
    1989 11 7 9.4 5.2
    1988 12 5 9.6 4.8
    1987 7 3 8 4.4
    1986 6 4 7.6 4.2
    1985 11 7 8.6 4.8
    1984 12 5 8.6 5.2
    1983 4 3 7.8 5.2
    1982 5 2 9.2 5.6
    1981 11 7 9.4 6.2
    1980 11 9 8.8 6
    1979 8 5 8.2 5.4
    The 5-year running averages clearly show that we are not at a 30-year low with respect to these statistics. And here are two text quotes from the NOAA archives: 1) “The 2005 Atlantic hurricane season was the most active of record. Numerous records for single-season activity were set, including most storms, most hurricanes, and highest accumulated cyclone energy index“; and 2) “From 1995 through 1998, 33 hurricanes occurred, the largest 4-yr total ever observed (going back to at least the start of reliable records in the mid-1940s)”.

    Finally, the AGW hypothesis does not belong to NOAA, as your wording appears to imply. NOAA is not out to defend or prove the hypothesis. They merely provide unbiased data sets, some of which may be helpful to researchers in the field.

  9. And your ridiculous claim that AGW does not cause dangerous climate change is laughable at best. There is overwhelming evidence that AGW does indeed cause dangerous climate changes. Upwards of 98% of all the researchers active in the field, a similar percentage of peer-reviewed papers published, and a near-totality of reputable scientific organizations the world over are in agreement on this point. Wake up to reality – or at the least stop wasting time posting such unfounded claims.

  10. Tom’s comments are focused on the link between extreme weather and global warming, not the link between human activity and global warming.

    With institutional arrangements in development (and who knows when we’ll all get on the same page and commit to a protocol), I think Tom’s suggestion to bury electrical cables and reinforce infrastructure and so on is prudent in any case.

  11. Tom also comments about human activities. But in any event, I believe I have shown that he in incorrect in his claim that global warming does not lead to increases in hurricanes, one type of extreme weather event.

    Every dollar spent on reinforcing infrastructure is potentially one dollar less that could have been spent to reduce human contributions to global warming. In other words, it is a dollar spent to reactively cope with the consequences of AGW; as opposed to being spent proactively addressing the true source of the problems. Problems that will only grow worse with the passage of time.

    Can you imagine how many 100s of billions of dollars would be required to reinforce infrastructure in thousands of locations throughout the country? We can’t know where the next string of mega tornadoes will strike – and even if we did, it’s difficult to protect against the strength of a tornado. Or, how do you cope with extreme drought – more dams and thousands of miles of aqueducts? I could mention many other examples. Are these reactive coping strategies really sensible ways to be spending our limited financial resources?

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