Tag Archives: Insurance

US taxpayers foot bill for climate inaction

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Farmland in Colorado affected by drought in July 2012 (the green areas are irrigated) Image: US Department of Agriculture via Wikimedia Commons

Farmland in Colorado affected by drought in July 2012 (the green areas are irrigated)
Image: US Department of Agriculture via Wikimedia Commons

By Kieran Cooke

In the US last year more than $100bn in financial losses was caused by extreme weather events – mainly Hurricane Sandy on the eastern seaboard and the severe drought which hit over 70% of the country.

LONDON, 26 November – Such losses, says Ceres, a US-based non-profit organization which promotes environmentally sustainable business practices, are set to rise considerably in the years ahead as a result of climate change, imposing an ever bigger burden on the US taxpayer.

Federal and state disaster relief payouts last year alone are estimated to have cost every person in the US more than $300.

Yet according to a new report by Ceres, Inaction on climate change: the cost to taxpayers, the US administration, its agencies and state bodies are still not facing up to the grave financial implications of a warming world.

“Part of the reason for our collective shortsightedness is that the issue of climate change, and what to do about it, has become politicised in the US”, it says.

The report says there have been at least 200 weather-related natural catastrophes annually in North America in recent years, compared to around 50 a year in the early 1980s.

Mounting losses

“As the frequency and severity of extreme weather events intensify with the effects of climate change, our federal and state disaster relief and insurance programs will become increasingly unsustainable as losses from such events increase”, says Ceres.

The biggest financial losses are caused by flooding, with a national flood insurance programme paying out billions annually. But for years the programme has been subsidising insurance policies and underpricing its premiums in high-risk areas such as coastal regions and floodplains. As a result it’s effectively bankrupt, with debts of $30bn owed to the taxpayer – and no realistic way of repaying.

Other factors are adding to the progamme’s woes. Sea levels along much of the eastern seaboard of the US are rising between three and four times faster than the global average, says the report. Yet more and more people are settling in coastal regions in such areas as Florida and North Carolina, and property values are increasing.

According to the National Oceanic and Atmospheric Administration (NOAA), the coastal population of the US increased by 39% between 1970 and 2010 and is likely to increase by another 8% by 2020. More people, in more expensive housing, means more exposure to loss for the insurers.

Eliminate subsidies

Ceres calls for the widespread application of new laws removing government insurance subsidies and for the phasing in of premium rates which better reflect climate change associated risks.

“Ultimately, however, individuals must understand the consequences of choosing to build in or to remain in an area that is highly vulnerable to flood risk.”

Building regulations should be tightened, with more solid homes being built in areas exposed to storms and hurricanes and less building taking place on floodplains.

A federal crop insurance programme, the main source of funds for farmers affected by climate-related disasters, is “heavily subsidised, unnecessarily expensive to taxpayers and provides no incentive to farmers to use crop production methods that decrease crop loss and increase resiliency to extreme weather events.”

In 2012, due in large part to the drought and heat wave, the programme paid out a record $17bn.

Preventative measures

Meanwhile taxpayer-funded federal and state wildfire protection payouts have tripled over the last 20 years due to longer and more severe wildfire seasons caused – says the report – by global warming. Increased population density in areas close to forests has also led to more payouts.

Overall policy must change, says Ceres, not only to take into account risks associated with climate change but also to better prevent and reduce damage from extreme weather events. One dollar spent on prevention saves four dollars in damages, says the report.

“Continuing to ignore these escalating risks may be more comfortable than confronting the challenges of climate change, but inaction is the far riskier and more expensive path.” – Climate News Network

More US insurers to reveal climate risks

EMBARGOED until 2301 GMT on Monday 22 July

Hurricane Sandy leaves its mark on Guantanamo Bay: More insureres must now disclose climate-related risks Image: Brett Perkins via Wikimedia Commons

Hurricane Sandy was here: More insureres must now disclose climate-related risks
Image: Brett Perkins via Wikimedia Commons

By Kieran Cooke

Two more US states say they will require insurance companies to reveal how prepared they are to cope with risks related to climate change.

LONDON, 23 July – The US insurance industry has been reluctant to recognise the dangers posed to its customers – and its revenues – by a warming climate. Now there are signs that attitudes in the multi-billion dollar sector are slowly beginning to change.

In the last week the states of Connecticut and Minnesota announced they would be adopting regulations applying in California, New York and Washington states which require insurance companies to fully disclose their readiness to deal with climate change-related risks.

“As insurance regulators, it is important that we identify those climate-related factors that can affect the marketplace and in particular the availability and cost of insurance”, says Thomas B. Leonardi, Connecticut’s Insurance Commissioner.

Elsewhere in the US, insurers seem unwilling to contemplate the implications for their businesses of changes in climate. While some states, particularly California, have been pressing insurers to be more aware of the dangers posed by climate change, the remaining 45 states have so far refused to adopt the disclosure requirements.

Under the regulations, insurance companies operating in the states involved and who have more than $100 million in premiums under their control have to answer a survey which measures their response to the impact of climate change. Questions range from carbon footprint reduction plans to risk management in a changing environment.

Ceres, a US organisation which promotes more environmentally sustainable business practices, says that while 2012 was the warmest year on record across much of the country and the second most extreme weather year in US history, many in the insurance industry are only just beginning to think about how to address the effects of climate change on their business.

In a report earlier this year analyzing the results of a survey in those states requiring climate change disclosure, Ceres said that of the 184 companies reporting, only 23 had comprehensive climate change strategies: of those 23 companies, 13 are foreign-owned.

‘Profound implications’

Ceres says only certain sectors in the insurance industry, such as those specializing in property and casualty, seem to fully understand the risk that climate change poses to their business.

“In fact, every segment of the insurance industry has climate risks. Life insurers, for example, own hundreds of billions of dollars worth of real estate in vulnerable coastal areas.”

Mindy Lubber, the Ceres president, says the implications of what she calls the highly uneven response of insurers to the dangers of climate change are profound.

“…The insurance sector is a key driver of the economy. If climate change undermines the future availability of insurance products and risk management services in major markets throughout the US, it threatens the economy and taxpayers as well.

“Just as the insurance industry asserted leadership to minimize building, fire and  earthquake risks in the 20th century, the industry has a huge opportunity today to lead in tackling climate change risks”, says Lubber. – Climate News Network

Insurers given severe weather warning

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Financial blow: severe hurricane damage to a house in Pensacola Beach, Florida, US Image: Dave Saville/FEMA Photo Library

Financial blow: severe hurricane damage to a house in Pensacola Beach, Florida
Image: Dave Saville/FEMA Photo Library

The rise in extreme weather events driven by warming of the oceans has led analysts in the global insurance industry to issue a warning that the sector risks being hit by waves of costly claims unless it starts pressurising governments to take action on greenhouse gas emissions

By Kieran Cooke

LONDON, June 28 − The global insurance industry’s own analysts warn that it faces potentially serious financial losses unless it plays an active role in urging governments to address climate-change factors such as greenhouse gas emissions.

The Geneva Association, a leading international insurance thinktank that examines trends in the global insurance industry, has published a report this week that identifies “a significant upward trend in the insured losses caused by extreme weather events”.

It warns that changes in climate mean insurance companies have entered a new, highly uncertain era, and must adapt to what it calls a “new normal” in assessing risks and setting pricing policies. Traditional ways of assessing such risks, based solely on analysing historical data, are “increasingly failing”.

The report, Warming of the Oceans and Implications for the (Re)insurance Industry, says the world’s oceans have been warming significantly as the result of rising greenhouse gas emissions − and it is this warming that is the key driver of global extreme events.

Ocean dynamics

“Understanding the changes in ocean dynamics and the complex interactions between the ocean and the atmosphere is the key to understanding current changes in the distribution, frequency and intensity of global extreme events relevant to the insurance industry − such as tropical cyclones, flash floods or extra-tropical storms,” the report says.

The warming of the oceans means an “increased loss potential” for the insurance industry, the report says. It’s uncertain how the risk associated with the warming of the oceans and changes in climate will develop over time, but the report’s authors advocate moving from traditional data-based ways of assessing such risks to what they call predictive risk estimation methods, based on various modelling techniques.

Such forecasting techniques are by no means perfect and can often give rise to  more uncertainties − although this does not mean they are not useful or scientifically sound. “It rather reflects the limits of the scientific understanding and the ability to predict extreme events in a chaotic system,” the report says.

Increased risk

The report’s authors issue a stark warning about insurance-related problems in parts of the world that are seeing increasing levels of risk matched with growing  demands for insurance, and, at the same time, decreasing levels of self-protection. Such areas might be uninsurable, the report says. “Examples for markets with this potential are UK flood or Florida wind storm insurance.”

The only way to make sure such regions remain insurable is immediately to put in place risk-mitigation measures says the report. The insurance industry should distribute high-quality information about risk associated with climate change, and should encourage adaptation through innovative product design.

The report concludes: “These actions, alongside the support of science in tackling the major challenges in projecting the impacts of ocean warming and climate change more generally, will help the insurance industry avoid market failures and increase societal resilience.” – Climate News Network

Climate leaves corporate Australia snoozing

 

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Bush fires, heat waves and flooding are happening more often in Australia Image: thinboyfatter

Bush fires, heat waves and flooding are happening more often in Australia
Image: thinboyfatter

By Kieran Cooke

Though Australia is considered one of the countries most vulnerable to the vagaries of a changing climate, very few in the Australian corporate sector pay much attention to the issue says a report focusing on business attitudes in the country.

LONDON, 30 April – “…Australian companies appear to be struggling to move forward in responding to climate change impacts, apparently paralysed by short-term profit-first thinking, uncertain political risks and a corporate culture unused to volatility and disruption”, says the report.

The study, funded by the Australian Government’s National Climate Change Adaptation Research Facility, says that though more than 100 companies were grilled at length on climate change, it’s clear very few give much weight to the issue, either in terms of corporate planning or in assessing future risks to their businesses.

“The private sector’s failings in assessing and managing existing climate risks are becoming increasingly evident”, says the report. For example, in the transport sector, very little is known about the potential impacts of climate change – further research is urgently required to explore and manage the potential for what the report describes as the considerable cascading effects of changes in climate, especially on the tourism sector.

Meanwhile the property and real estate sector faces “a phenomenal challenge”, with an estimated A$81bn (£54bn) worth of property vulnerable to a rise in sea levels, and more than half a million homes at risk of floods. Much of Australia’s infrastructure is aged, says the report, and has not been designed or operated with climate change in mind.

The study questions the role of the  Australian Government: on one hand it expects the private sector to adapt to climate change, yet on the other it gives few, if any, incentives to promote changes in corporate behaviour. Australian companies are missing out on opportunities and innovations associated with climate change while Asian-owned mining, gas and technology business are cashing in.

The report notes that the insurance industry can act as an economic shock absorber and underpins much of present-day economic activity.

“…Climate related events are causing an increasingly disproportionate percentage of payouts”, it says. The costs of insurance are going up – and in some instances businesses might find their activities can no longer be insured.

Electoral tussle ahead

 

The study also highlights what it calls the legal imperative which should be driving businesses to adapt to climate change.

“One of the key legal findings from the research is that corporations need to identify their climate-related risk, and, once quantified, ensure that such risk forms an integral part of their environmental risk management process”, says Mark Baker-Jones, one of the report’s authors.

A separate report released in London earlier this month warned of the risk of investing in mining and other companies which have assets that ultimately – if climate change is going to be tackled – might have to stay in the ground.

On a per capita basis Australia is one of the world’s leading greenhouse gas emitters, mainly due to its giant coal mining industry. Noting an increase in extreme heat waves, flooding and bush fires in recent years, the Government’s Climate Commission has called for fast and deep cuts in emissions in order to cope with future changes in climate.

Climate change is likely to be a key issue in federal elections scheduled for later this year. Tony Abbott, leader of Australia’s main opposition Liberal Party – in the past he has dismissed climate change science as “crap” – has vowed to repeal a carbon tax introduced last year by the ruling Labour Party, headed by Prime Minister Julia Gillard. He has also promised to repeal a tax on mining activities. – Climate News Network

UK’s climate chief lambasts deniers

EMBARGOED until 0001 GMT on Friday 1 March

Oxford, home of lost causes: Climate deniers "would beggar future generations" Image: Tejvan Pettinger

Oxford, home of lost causes: Climate deniers “would beggar future generations”
Image: Tejvan Pettinger

By Kieran Cooke

Climate deniers have come in for a scathing attack from one of the chief architects of the United Kingdom’s policy to try to stop global temperatures rising dangerously.

LONDON, 1 March – Climate change deniers must be faced down and not allowed to get away with talking rubbish, says John Gummer, former UK Secretary of State for the Environment.

Now ennobled and known formally as Lord Deben, Gummer chairs the UK’s Committee on Climate Change (CCC), a position which gives him real influence in the continuing debate.

In a vehement attack on what he described as “the small cabal of deniers”, Gummer said this group was always arguing that climate change is not yet certain and that doing anything is expensive and inconvenient – so it is best not to act.

“Procrastination has been elevated into a political philosophy”, he told an event in Oxford organised by the University’s Environmental Change Institute. And there was a darker side. The deniers were backed by large amounts of money from mysterious sources.

“Their actions mirror those of the tobacco industry over the years – the parallels are absolute and continuous”, said the CCC chairman.

The CCC, an independent body set up under the UK’s 2008 Climate Change Act, advises the Government on carbon targets and on preparing for the impacts of climate change.

The climate change deniers had wrongly been labelled sceptics, said Gummer. “Scepticism is the essence of science. Every scientist is a sceptic. Sceptical science takes nothing for granted. That is what scientists do.”

Insurance is worthwhile

 

He said the vast body of scientists and specialists realised the threat posed by climate change. Yet the deniers were constantly saying that because there was no absolute certainty, we should do nothing – until climate change overwhelmed us.

The lecture, entitled Even ostriches need third party insurance: the case for action on climate change in a polycentric world, drew parallels between how people deal with questions of insurance and how the deniers view the possibility of climate change.

“In the UK there are about 26 million homes insured against fire”, said Gummer. “Even though the chance of your home being destroyed by fire is very small, a fraction of one per cent, we insure our homes. Very few protest about it.

“The scale of climate change – both in likelihood and size – is far greater, yet the deniers persist with the idea of doing nothing, or that something will turn up to solve the problem.”

He also rounded on the green movement which, he said, preached a doctrine of misery: “Most people would like to be comfortable. There’s no advantage to freezing. The challenge is to come up with practical energy solutions, to end our dependence on fossil fuels.

“If not we will, at best,  have beggared future generations – and buggered up the the only planet we have.” – Climate News Network