Extreme Weather Calls for Extreme Measures
The recent droughts, wildfires, and hurricanes sweeping the nation has put the words ‘climate change’ back in the national dialogue. Extreme weather is an expensive trend for the U.S. economy.
This month’s National Geographic’s cover story Extreme Weather found that losses from such events helped push the cost of weather disasters in 2011 to an estimated $150 billion worldwide, a roughly 25 percent jump from the previous year.
Companies that rely on electricity, infrastructure, transportation, water, food, cloth, etc., essentially all U.S. businesses, are at risk. The effects of extreme weather are felt in global food prices driving up the cost of food, blackouts sweeping India, and a U.S. electric grid that is buckling with increased electricity use at the same time that power plants are shutting down because they rely on water to cool the plant. The economic losses from extreme weather linked to climate change will impact every sector of the economy.
In her recent Forbes blog, Ceres President Mindy Lubber noted how extreme weather is costing insurance companies a bundle. She urged insurance companies to begin to incorporate the increasing intensity of weather patterns into the business plan, as “wild weather” becomes the new normal.
The U.S. insurance industry continues to be “surprised” by extreme weather losses. But the truth is that weather extremes are no longer surprising… And in the face of a changing climate, such events can be expected to increase in number and severity. It’s time for insurance companies to recognize this new normal, and incorporate it into their business planning—for the sake of their shareholders, their industry’s survival, and the stability of the U.S. economy.