Weather plays a large role in the Insurance Industry. This is especially true with insurance policies regarding home and business insurance. Weather is an important factor on insurance cost in the United States and the world. The insurance industry will continue to change as climate change accelerates.
AIG published a report that discussed climate change and how it is affecting insurers. Research has showed that the global temperature average has increased. Most scientists believe this is due to growing concentration of greenhouse gases being released into the atmosphere. Scientists believe that temperatures have been going up for millennia, but that this current increase is primarily ...view middle of the document...
pdf) The market leader in catastrophic risk modeling, Risk Management Solutions, has changed its modeling system to account for heightened hurricane system, which they attribute to global warming. The new model developed is expected to increase insurance premiums.
Ceres published a report in September of 2012 that showed that insurance payments have increased 15 fold over a 30-year period. (Ceres: “Stormy Future for U.S. Property/Casualty Insurers: The Growing Costs and Risks of Extreme Weather Events: September 2012. See http://www.ceres.org/resources/reports/stormy-future.) The Ceres report predicts that these trends will continue and that the very existence of the insurance industry is under threat if this isn’t addressed. As premiums rise less businesses and consumers will be able to afford insurance and thus if a catastrophe occurs they will suffer a 100% loss with no reparations. The report predicts that as a last resort the federal government will replace insurers such as AIG or Berkshire Insurance. The problem is that if that occurs then taxpayers can be on the hook for weather related incidents, which is completely unfair. Government exposure to losses in hurricane-exposed states has risen to a record $885 billion according to the AIG Report.
The Ceres report states numerous recommendations to both reduce costs for the insurers and consumers as well as help combat global warming. Insurers should integrate new risk management analysis into their reports to account for extreme weather occurrences, invest more heavily in weather research and reporting, work with climate scientists to change modeling techniques, change underwriting guidelines, and help create and promote products that are clean and efficient uses of energy.
The AIG report concludes with a summary that states that if insurers do not adjust their insurance policies to reflect climate change, there is a significant chance of them suffering economic trouble. The report believes that all society has a vested interest in a strong insurance business and that the consumer should advocate insurers to become “weatherproof”.
A NY Times article posted in May 2013 echoes the same sentiment that AIG talked about in its report. (http://www.nytimes.com/2013/05/15/business/insurers-stray-from-the-conservative-line-on-climate-change.html?pagewanted=all&_r=0) Eduardo Porter, writer for the NY Times, writes that [insurance] expects the situation will get worse. Peter Hoppe from Munich Re believes that a rise in Summer Drought and an increasing probability of cyclones will open up the insurance industry to more risk. Most of the insurance industry is driven by scientific study and they don’t really listen to people in right wing circles who think global warming isn’t happening. The insurance industries stance is that burning fossil fuels is the main culprit of global warming. The interesting part is that the insurance industry is doing nothing to combat global warming.
A lot of scientists...