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What the Insurance Industry Thinks About Climate Change
Hugh Pickens DOT Com writes "Joseph Stromberg reports at the Smithsonian that if there's one group has an obvious and immediate financial stake in climate change, it's the insurance industry and in recent years, insurance industry researchers who attempt to determine the annual odds of catastrophic weather-related disasters say they're seeing something new. 'Our business depends on us being neutral. We simply try to make the best possible assessment of risk today, with no vested interest,' says Robert Muir-Wood, the chief scientist of Risk Management Solutions (RMS), a company that creates software models to allow insurance companies to calculate risk. Most insurers, including the reinsurance companies that bear much of the ultimate risk in the industry, have little time for the arguments heard in some right-wing circles that climate change isn't happening, and are quite comfortable with the scientific consensus that burning fossil fuels is the main culprit of global warming. 'Insurance is heavily dependent on scientific thought,' says Frank Nutter, president of the Reinsurance Association of America. 'It is not as amenable to politicized scientific thought.' A pronounced shift can be seen in extreme rainfall events, heat waves and wind storms and the underlying reason is climate change, says Muir-Wood, driven by rising greenhouse gas emissions. 'The first model in which we changed our perspective is on U.S. Atlantic hurricanes. Basically, after the 2004 and 2005 seasons, we determined that it was unsafe to simply assume that historical averages still applied,' he says. 'We've since seen that today's activity has changed in other particular areas as well—with extreme rainfall events, such as the recent flooding in Boulder, Colorado, and with heat waves in certain parts of the world.' Muir-Wood puts his money where his mouth is. 'I personally wouldn't invest in beachfront property anymore,' he says, noting the steady increase in sea level we're expecting to see worldwide in the coming century, on top of more extreme storms. 'And if you're thinking about it, I'd calculate quite carefully how far back you'd have to be in the event of a hurricane.'"
Insurance companies are always looking for an excuse to raise rates. They are not going to look for evidence against global warming when they can pretend that it has all been totally proven and tell clients that the risks are now sky high and, oh, by the way, your rates are now 60% higher to account for that.
The downside is that their less-pessimistic competitors undercut them on rates and win big.
Until, of course, the pessimistic view proves right, and those competitors go under. Or, if you're really pessimistic, get a bailout.
Seriously, you take their estimate of risk as gospel? Their goal is to collect as much as possible, and pay as little as possible. They are simply trying to hedge their bets on the collection side. Duh.
And for the record, the Atlantic hurricane intensity has not increased one iota. That is a complete outright lie which they should know if they spoke to an actual expert on Atlantic basin hurricanes. The reason for larger payouts from damage in the past is that MORE people and expensive property are near the coast lines. They have been subsidizing bad behavior. Climate change is not the culprit there.
If another insurance company thinks climate change is a bunch of bunk, they can lower rates and steal business from the company that has reached the opposite conclusion.
Insurances are ready to accept global warming as it will help them adjusting their prices, but that does not mean they will do anything to prevent it, nor even to get it accepted by everyone.
People are building in places where they probably shouldn't build. Many of the good places to build are used up, and people have an almost irresistable pull to build in dangerous places.
What exactly defines a "good place to build"? If you define it as somewhere with low flooding risk, low earthquake risk, low hurricane risk, etc., there are lots of places in the middle of the U.S. that fit that standard. There are even places with all of that and low risk of wildfires and low risk of tornadoes as well, though one has to be a bit choosy to avoid those things in the middle of the U.S. And of course freak weather is always a possibility.
Nevertheless, there are thousands upon thousands of square miles of land in the middle of nowhere that would be perfectly "good" for building with low risks to insure.
People aren't building there, though. It's not because they have an "irresistable pull to build in dangerous places." It's because we've transitioned to an urban culture and away from a rural one. Most people don't want to stake out a claim on the frontier somewhere anymore and live on all those thousands and thousands of square miles of unoccupied (and often low-risk) land.
This has nothing to do with a danger fetish. It has to do with the fact that people want to live "where the cool people live." And rural life just isn't marketed as desirable anymore.
That's why we have people piling on top of each other to live in risky places. Not because there is any lack of room for people to build and live in non-risky places.
(Now, admittedly, my comment applies specifically to the U.S., but it is applicable to many other developed countries as well, whose culture has shifted away from rural life. There are only a few countries, mostly in Europe, and perhaps increasingly in southeast Asia, where "the good places to build" have actually been "used up.")
Well, let me be the first to say that you are a complete fucking selfish asshole. I imagine the millions of people that are going to die so you can a slightly more pleasant September will go to their graves knowing they died for a good cause. The hot spots on this planet are going to get hotter and the warm places are going to get hot. That means agriculture across the planet is going to be disrupted on the very large scale. Which possibly means millions of people of dying, but that's okay, you can wear a short sleeve shirt in September!
As for those nobodies that live on the coast, which is probably a good chunk of the human population, they'll just have to suck it up. Their cities will disappear and they'll just up and move, like it's nothing. It's just their lives and livelihood, I mean, it's really nothing. The trillions of dollars in infrastructure across the world will need to be replaced or augmented will come out of our pocket change, but that's okay, you're warm in September!
Of course, let's not discus the thousand or millions of species that live on this planet are going to heavily impacted or die. The giant and highly complex ecosystems across world with just have to "suck it up", you know, they don't do anything but make the world livable and the air breathable (I don't mean that figuratively either.) The environment will change in 100 years what would usually take 100,000 years, with a huge mystery of how it will turn out, but who cares, you get to drive a super size truck! I mean, if Mother nature was not such a pussy, she would not have this problem because it is all about YOU.
PS> If you don't like the September's where you live, you can fucking move, you ignorant fuck.
Linux O Muerte!
Oh, you know else who is making business decisions based on a future of anthropogenic (sorry, I typed wrong) climate change?
ADM, Monsanto, Dow Chemical. Companies that are involved in worldwide agribusiness. They're all betting heavily on climate change (the anthro-something one).
But not you, because you know better and the AM radio told you so.
You are welcome on my lawn.
The physics of CO2 infra red absorbsion are well defined
Then why is there a factor of two error bar (which might grow with the latest IPCC report) from lowest to highest estimate for the sensitivity of global temperature to CO2 concentrations? That small niche of well defined properties is embedded in a vastly complicated system which we don't have similar certainty about.
Is anyone else basking in the irony of all these pro-business AGW denialists suddenly trying to come up with excuses for why the market disagrees with them?
You don't need regulation for anything, market forces keep companies honest and well behaved!! Except now... because insurance companies are somehow able to charge unnecessarily high premiums without being undercut by a competitor, or the government is making them overcharge or something...
The market is right, unless is disagrees with you, and then it's wrong.
I stole this Sig
They exist to help it's customers in times of need, yet it's a for profit business. Those 2 do NOT work together.
All businesses exist to help customers with their needs. Profits are a monetary signal that they're running the business correctly, and the incentive to put up the capital for risk in the first place.
Real insurance is just a collective risk sharing pool with a management fee. Granted, regulatory agencies have made that simple reality as painful as possible.
My God, it's Full of Source!
OUTSIDE_IP=$(dig +short my.ip @outsideip.net)
I get the point but similarly large rainfalls occurred several times last century. About the same back in 1914.
Part of the devastation is due to building in dry creek beds. So the level of damage is due to more humans and unwise building habits.
Climate change has potentially contributed to these type of rainfall events being more likely (and I've seen some charts which support this-- things that used to happen every 20 year are now happening every 10 years- maybe even more often). I've seen the number "12% more likely for extreme weather to occur" for that area of the country. Those articles were less able to prove it was global warming (the old causality thing) but leaned towards believing it was.
But you still shouldn't build below historically observed storm surge levels or historically observed flood zones. You WILL get heavy damage and flooding.
At the least, the government shouldn't pay for disaster relief for a particular area more than once a generation.
She was like chocolate when she drank... semi-sweet at first and then increasingly bitter.
Facts??? Global warming is immune to facts, logic, and common sense. Just because all of their prior predictions are wrong does not mean they will discard them. The true believers would still believe in it if they froze to death on the equator.
I find that a kind of odd statement. First of all, I wonder what you mean by "major" hurricanes and making landfall. Is "major" category 3, 4, or 5? Does it take into account things like diameter? Is that ever, or just when it makes landfall in the US? I mean, it sure seems like you are carefully crafting you wording to exclude some pretty notable storms, like Dean, Felix, and Ike. And Sandy is a pretty dubious non-major hurricane, given that it had the largest diameter of any Atlantic cyclone, which was a large contributing factor to how damaging it was. And what's with the US mainland only caveat? Climate change only counts if the hurricanes happen to make landfall within artificial boundaries on a map? Felix didn't turn north after slamming into the Yucatan the same way WIlma did, so it didn't happen? Besides, I think if you actually applied your criteria prior to 2005, you'll find that it eliminates so many hurricanes that an 8 year gap isn't statistically anomalous at all.
When you have to get that oddly specific, you should be at least a little worried that you are cherry picking data to create "proof" of your already decided upon conclusion. If you instead just look at more general trends in quantity and strength of storms, it's pretty clear that we have had more and stronger hurricanes over time.
The one thing is the data they get is based on claims. So lets say a particular undeveloped area had a flood 1 out of every 20 years. The insurance companies wouldn't know about it because nobody makes a claim. Now a developer puts 500 homes there. Sure enough the flood happens and now they have 50 claims. Is it the weather or climate changing or is poor development practices.
His statement on beachfront property is a clue. People never built nice houses,with the exception of the very wealthy, on the actual beach because you knew either a hurricane or North Easter was going to wipe it out. Most people built beach shacks that were just a place to sleep and were pretty cheap. But states started regulating insurers to force them to insure beachfront property. The states liked it because the new houses were much more valuable and paid higher taxes. We are seeing the result.
I love Jesus, except for his foreign policy.
unwise building habits.
Did you build your house on the top of a hill? High winds rip off your roof.
Bottom of the hill? Floods.
On the side of the hill? Mudslides.
Built on a flat featureless plain? Tornadoes.
Did you build a basement to seek shelter in? Heavy rains soak in and ruin everything.
But areas with heavy rains aren't featureless plains, they develop rivers that cut gouges into the earth and make for bluffs. And mudslides only happen when there's extreme soil erosion. If there's going to be flooding at the bottom of the hill there's usually a RIVER there.
All of those are arguments that make sense when the climate isn't schizophrenic. What appears to be "unwise building habits" AFTER the freak weather happens was a perfectly rational thing to do given the local climate. Nobody builds big towers in hurricane country. But what counts as "hurricane country" is changing. They didn't build the sewers of New york to deal with city-wide flooding. They are not prepared for that. They DID build the sewers of New Orleans to deal with city-wide flooding, because it's happening constantly. Changing that sort of infrastructure is expensive and hard. But not having a suitable infrastructure is ludicrously more expensive.
So be careful with how you long about the term "unwise building habits". What was once perfectly wise, now isn't. And buildings last a really long time. Hopefully.