That is just part of why it is so difficult for insurers and reinsurers to calculate risks to individual properties, Maggie Koerth-Baker writes for the New York Times. Another problem is that insurers have long extrapolated from past weather patterns – a method that, as our climate rapidly changes, just won’t cut it. So the sector is working with scientists to adopt increasingly sophisticated climate modeling.
These solutions are urgently needed – in sectors far beyond insurance. The Center for Climate and Energy Solutions recently found that nearly 90 percent of S&P Global 100 Index companies identify extreme weather and climate change as current or future business risks, but they lack the data and tools needed to effectively assess and manage these risks. Meanwhile, infrastructure investors are failing to consider climate risk when building business models in areas that have yet to experience the effects of climate change, a report by insurance company and risk adviser Marsh found.
But the lack of preparation within the insurance industry is shocking enough in itself. In March, a Ceres report said that just one-eighth of US insurers have comprehensive climate change strategies.
Their reticence is all the more surprising, given the financial costs. Extreme weather — from Hurricane Sandy to the worst drought in 50 years — last year generated $35 billion in privately insured property losses for US insurers. This figure is $11 billion more than the average over the last decade.
Tamar Wilner is Senior Editor at Environmental Leader PRO.
Picture credit: Ready.gov