Climate And Insurance: The Bill Is Coming Due

I was talking with a close friend in the insurance industry over the weekend. She was relating some information she had heard at a seminar she attended. It seems that the re-insurance companies are seeing their losses due to extreme weather events last year was way above averages and trends. Averages and trends are used to set much of the rates they charge.

Sure enough Monday morning I get a link to an article in Grist saying that very same thing: 

“Extreme weather events have caused an estimated $115 billion in insured financial losses around the world this year according to Swiss Re, the Zurich-based reinsurance giant. That’s 42 percent higher than the 10-year average of $81 billion.

The firm estimates that $50 billion to $65 billion of the total losses are a result of Hurricane Ian, the category 4 storm that pummeled parts of Florida’s west coast in late September with torrential rain, a 10-foot storm storm surge, and winds topping 140 miles per hour. Swiss Re ranks Ian as the second costliest natural disaster ever, in terms of insurance losses, after Hurricane Katrina struck south Louisiana in 2005.

It’s not just severe storms causing the damage. In February and March, torrential downpour inundated vast swaths of northeastern Australia and racked up an estimated 4 billion in financial damages, more than any other natural disaster in the country’s history. In June, a series of fierce thunderstorms in France sent large hailstones tearing through roofs and destroyed miles of vineyards. The total insured losses were estimated to be around $5 billion. All of them combined to pushed losses above $100 billion for the second year in a row.

Swiss Re conducts this analysis as part of providing reinsurance, a type of financial protection for insurance companies hoping to shield themselves from absorbing all the risk in their portfolios. Climate change has begun to pose major challenges to the industry, as increasingly frequent and severe storms generate unprecedented financial losses. “

This is what we have been expecting for quite a while. Weather events have been expected to become more and more extreme as the global temperature average increases and forces are unleashed that mankind is little prepared for. 

Some events will be quick and immediately catastrophic like Hurricane Ian was in Florida earlier this year. Others will be slow moving , but will reach a crescendo of damage, such as the years long drought that has been going on in various parts of the world including the US. Droughts have led to some huge fires as vegetation becomes tinder dry landing waiting for a spark.

Thanks in great degree to a media that focuses more on today’s latest insult from a certain former president, most people are now being surprised by the crisis we are finding ourselves as if it happened overnight. Younger voters are aware this is not a surprise and they are demanding that something be done.

Two weeks ago a story on a research paper commissioned by the American Petroleum Institute published and then quickly forgotten about in the late 1960s:   

  • “There seems to be no doubt that the potential damage to our environment could be severe,” the authors wrote in the 1968 paper.

“Carroll Muffett began wondering in 2008 when the world’s biggest oil companies had first understood the science of climate change and their product’s role in causing it. A lawyer then working as a consultant to environmental groups, he started researching the question at night and on weekends, ordering decades-old reports, books, and magazines off Amazon and eBay, or from academic libraries.

It became a years-long quest, and as he pressed on, Muffett noticed one report kept coming up in the footnotes of the memos and papers he was poring through — a 1968 paper commissioned by the American Petroleum Institute, the powerful fossil fuel trade group, and written by Elmer Robinson and Bob Robbins, scientists at the Stanford Research Institute, known as SRI. Muffett wasn’t sure what it said, but it was cited so often he knew there must be something big in it. Then part of Stanford University, SRI wasn’t an ordinary department, but a contract research outfit that had been intertwined from its founding with oil and gas interests. The paper had been delivered privately to the petroleum institute, not published like typical academic work, and only a few copies had spilled into the public realm. Long since forgotten, they had been gathering dust in a handful of university libraries. Eventually, through an interlibrary loan, Muffett managed to get a hold of one.

“Once I actually opened it, it was immediately clear how profoundly important it was,” he remembers. “It was absolutely a jaw drop moment.” This was the earliest, most detailed and most direct evidence Muffett had yet seen that the industry’s own experts had warned its largest trade organization, not just an individual company, “that the science around climate change was clear, it was abundant, and that the best indications were that the risks were really substantial.” The paper’s delivery date put it well before Exxon’s extensive 1970s research into climate risks.

In stark terms, the decades-old paper explained that the world’s use of fossil fuels was releasing carbon that had been buried for millennia, and “it is likely that noticeable increases in temperature could occur,” if that burning continued. That would mean warming oceans, melting ice caps, and sea levels that could rise by as much as four feet per decade, the report predicted. “There seems to be no doubt that the potential damage to our environment could be severe,” the authors concluded. “The prospect for the future must be of serious concern.”

The discovery of this long ago commissioned research paper has led to several sates suing the API and various oil companies for damages. This and other cases will be fought in the courts for years, maybe decades. The research paper is certainly a smoking gun if ever there was one. 

Please read the article by Beth Gardiner at the Yale e360 website. It is a thorough article that gives details of the pros and cons of this thorny issue. 

About Dave Bradley

retired in West Liberty
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