MarketWatch: Global Warming No Hoax to Insurance Companies
Residents of Stumpy Point, N.C. make their way into their flooded home following the effects of Hurricane Irene. (AP Photo/Gerry Broome)
When it comes to global warming, it’s a tough call deciding whose hot air to believe: Al Gore or those AM radio right-wingers who call it hoax.
Me? I go with the insurance industry. If anyone is going to feel a rise in global temperature — and the destructive weather it causes around the planet — it’s the people who have to pay for the damage.
And here’s what insurance companies are reporting to state insurance commissioners:
“Genworth recognizes that climate change poses significant potential risks to the environment, the global economy and to human health and well being. We also recognize that human activity contributes to global warming.” — Genworth Life Insurance Co. of New York
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“AIG was the first U.S.-based insurance company to adopt a public statement on the environment and climate change, recognizing the scientific consensus that climate change is a reality and is in large part the result of human activities that have led to increasing concentrations of greenhouse gases in the earth’s atmosphere.” — Chartis, a subsidiary of American International Group Inc.
“The earth’s climate appears to be changing in ways inconsistent with the historical record upon which catastrophe models draw data.” — ACE USA
“Climate change could cause reduced loss predictability.” — RiverSource Life Insurance Co. of New York
“Commercial, residential, and marine property classes may be at risk because of climate change.” — General Reinsurance, a Berkshire Hathaway Inc.
“Swiss Re’s climate experts remain in close contact with the climate research community. Recent initiatives have looked at the effects of climate change on coastal flood damage and storm damage in Europe as well as the economics of climate adaptation...around the world, including Florida.” — Swiss Re AG
“USAA purchases enough reinsurance and holds enough capital to cover potential impacts of global warming.” — USAA
“With respect to longer term potential effects of climate change, such as health and food supply issues or potential depopulation of certain vulnerable areas, we have no exposure to vulnerable areas such as the Arctic or sub-Saharan Africa,” — Assured Guaranty, bond insurance
I cribbed these quotes from a report released last week by the National Association of Insurance Commissioners and a nonprofit research group, Ceres. It was supposed to be released earlier, but the release date was postponed because of Hurricane Irene.
“This year is a painful and important reminder that climate change will inflict damage across the U.S.,” said the report’s author, Sharlene Leurig, on a conference call. “Unfortunately, science is telling us that more years in the future are likely to look like 2011.”
Before Irene caused several billion dollars in damages along the East Coast, insured losses were already 40% higher in 2011 than all of 2010, Leurig said. The damage includes a $1 billion hail storm in Oklahoma City, $7 billion in tornado damage in the Midwest over just three days and $16 billion from various thunderstorms, she said.
Climate change has also contributed to the frequency and severity of the floods, droughts, ice storms and wildfires making regular headlines across the nation, according to the report. “Climate change will not simply be a coastal problem,” Leurig said.
As CEO of the $130 billion California State Teachers Retirement System, or CalSTRS, Jack Ehnes wants to know more.
Ehnes said that while insurance companies have been warning about climate change for more than a decade, they haven’t been so good at formally disclosing the specific risks of climate change that they face. “This means that investors and regulators have been flying blind,” said Ehnes, who formerly served as insurance commissioner in Colorado.
The survey drew responses from 88 insurance companies and found that while there’s a broad consensus that climate change will result in more severe weather and more insurance losses, only 11 of the companies surveyed have implemented climate-change policies.
“You can’t buy a house. You can’t drive a car, or start a business without insurance,” Ehnes said. “Insurance is the oxygen that keeps the global economy alive. And our fear is that climate change poses a fundamental threat to the long-term availability and the affordability of insurance.”