CLIMATE CONCERNS

The National Association of Insurance Commissioners was scheduled to hold a symposium on climate change in September in New Orleans. Hurricane Katrina postponed the meeting while dramatically reinforcing the fact commissioners were focusing on an issue with major implications for the insurance industry, and the rest of the world.

Meeting recently in Florida, the association voted to establish a task force to examine the impact of climate change on the insurance industry and its U.S. consumers. The association has a narrow focus on overseeing the solvency of insurance companies and ensuring they provide affordable policies to consumers. They won’t debate whether human activities such as driving and power generation are contributing to climate change, stressed President Alessandro Iuppa, Maine’s insurance superintendent.

Still, their action shows that many industries and regulators are taking concrete steps to deal with climate variation while the official U.S. policy is to downplay its causes and consequences. The need for such steps was highlighted by a study in the current issue of the journal Science that predicted a 20-feet sea level rise in coming centuries if current warming trends continue.

Climate change and the insurance claims that could result should be a consideration of companies when assessing their reserves. The association has developed model state laws and regulations on other issues and could do so here, although a decision to do so hasn’t been made.

According to the Coalition for Environmentally Responsible Economies, U.S. insurers have seen a 15-fold increase in insured losses from catastrophic weather events in the last three decades. The increase has far outpaced population growth, inflation and growth in premiums. Swiss Re, the world’s second-largest reinsurer, announced two years ago that it expects environmental disasters – from storms, drought, flooding, hurricanes, and the like – to leap to $150 billion a year in the next 10 years, with insurance companies paying out $30 billion to $40 billion annually. Insured losses are expected to reach $60 billion from Hurricane Katrina alone.

Beyond property damage, climate change could alter other insurance lines such as those for healthcare and business. Warming could cause new diseases to appear or plants to spread northward bringing new allergies with them. Both would increase doctor visits and insurance payments. A lack of snow could wipe out a ski season, trigging claims from companies insured for such a possibility. Crop damage, from new blights or weather, could also lead to insurance claims.

The fact that this task force was created shows how negligent Congress has been in dealing with climate change. Even moderate attempts to reduce greenhouse gas emissions, long supported by Maine’s senators, have been killed by lawmakers. While they debate whether climate change is a real problem, state regulators have concluded it is and are taking steps to deal with it.