On May 3, 2007, the Government Accountability Office (GAO) released the report
Climate Change - Financial Risks to Federal and Private Insurers in Coming Decades are Potentially Significant. Some excerpts:
- "
Insurance is a mechanism for spreading risk over time, across large geographical areas, and among industries and individuals," OK.
- "
Taken together, private and federal insurers paid more than $320 billion on weather-related losses from 1980 and 2005. Claims varied significantly from year to year - largely due to the effects of catastrophic weather events such as hurricanes and droughts - but have generally increased over this period." Big dollars, big costs, increasing.
- "The growth in population in hazard-prone areas and resulting real estate development have generally increased liabilities for insurers, and have helped to explain the increase in losses." - "Since 1980, NFIP's (National Flood Insurance Program) exposure nearly quadrupled to nearly $1 trillion in 2005, and program expansion increased FCIC's (Federal Crop Insurance Corporation) exposure 26-fold to $44 billion." Huge numbers; huge increases.
So what?Getting our nose under the insurance industry's tent....what's in their best interest? They want to make sure all are aware of these new risks, then they have a basis for raising premiums - it reduces their risk. You'd do the same if you were in their shoes. Even if the expected weather events - increased flooding, hurricanes, and heat waves don't happen, we're still paying higher insurance premiums.
What is the GAO recommending? That various federal agencies "analyze the potential long-term fiscal implications of climate change for the FCIC and NFIP and report their findings to Congress." The Government
Accountability Office is recommending that we study potential outcomes instead of addressing the root cause. That's a problem.
It gets worse
In
testimony to the Governor's Task Force on Global Warming in Wisconsin, the Commissioner of Insurance cited several important facts including:
- from a GAO report:
The Department of Commerce said,
"what had been considered a 500-year event (i.e., its probability of occurring in a given year is 1 in 500) could shift under climate change to become a 100-year event."
- from a "Best Week" news article, Thursday May 31, 2007:
"Liability to insurers goes beyond structural damage events. A study entitled, "Climate Change Heightens Insurers' Exposure to liability Claims, Lawsuits," indicates broad categories of climate change insurer liability including:
1) Product liability claims associated with materials or product contributing to climate change;
2) Environmental liability claims for emitters of greenhouse gases based on climate change;
3) Commercial general liability claims, including negligence, personal injury and 3rd party business interruption due to disruptions in supply chains, transportation, utility services and communications;
4) Liability claims against corporate directors and officials involved as emitters or for failing to safeguard shareholder value from the impact of climate change; and
5) Political risk claims triggered by new government policies stemming from climate change."
This is all new - scary and an emerging economic problem. Insurance premiums are going up.
The good newsThese insurance premium increases are market signals that global warming is real, that it is affecting us negatively, and they we need to take action to solve the root cause.
