Insurance industry pricing climate risk as a dead certainty



Didn’t Kim Stanley Robinson have the big reinsurers try to restart the Gulf Stream (with massive supertanker-drops of salt) in his Science In The Capital series?


Note that this article dates from May 15th.

Yeah, climate change was thoroughly debunked by some guy on Fox News on July 7th, so YEAH Cory, why did you post this?


If you want to see denial at work, check out the Slashdot comment thread on this story.

Insurance companies are no longer to be trusted, along with scientists, assorted intelligence services, and the the military.

Senator Inhoffe and Penn & Teller now, gosh, they sure tell it like it is!


Playing devil’s advocate, couldn’t the existence of these policies be interpreted as selling to the gullible? I’m just saying I can hear denialists saying all it proves is that people will try to make money off suckers.

Have you read the article?

Cory’s write-up shouldn’t have used the term “climate change insurance,” because that suggests that there is a specific policy insuring against climate change problems.

What is happening is that insurance companies are taking the increased risks of bad weather, flooding, etcetera, into account when pricing existing flood insurance, homeowner’s policies, and so on.

Analogy: If geologists found a new, giant fault under your town in California, and jacked up earthquake insurance rates for residence, and announced the rate change, you wouldn’t accuse them of trying to “make money off suckers.”

Well, not unless you didn’t believe in earthquakes, or thought that scientists were in cahoots with insurance companies.


Insurance Companies reacting to inclement weather does not support or contradict anthropogenic global warming (errr climate change sorry). What it shows is that recent storms have been costly and insurance companies don’t like to pay out for the expensive damages. So they increase rates, change their policies to reduce coverage etc. - whatever they can do to protect their bottom line

Climate Change/AGW provides a convenient backdrop for increasing rates by said Insurance Companies. Whether or not Insurance Companies support/believe in AGW is besides the point; if there is any plausible reason for them to raise rates - they’re gonna do it.

What will the plebs do?

Pay more for insurance.

“Money talks, bullshit walks.”

True enough, but money and bullshit are quite often allied together, and there is no reliable way to deal with that when it happens.

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The point is, if there were a skeptical company that did not believe that the climate was going to be continually worsening, they could afford to offer cheaper rates than their doom-saying competitors and get all the business. Free market at work. But no one is taking that bet.


Insurance is a market driven business just like any other. If one insurer is a nervous nellie, and raises rates for fears that are unfounded, there will always be another insurer perfectly willing to leave rates be, and enjoy the influx of customers.

But this isn’t just a matter of raising rates. Insurance companies are dismissing entire cities and regions as uninsurable and walking away, expressly because of climate change. I’ll reiterate: they are walking away from customers who are willing to pay for insurance, because they think the risks are too difficult to quantify on account of changing climate patterns.


Insurance companies don’t much care whether Climate Change is man-made, unless they’re playing a deep enough game that they’re predicting politicians’ responses to it and the energy industry’s willingness to fund politicians who’ll say the politically correct “Don’t regulate us, bro!” instead of legislating to protect the planet. (They’re probably playing some of that game too, but it’s depressingly easy to predict how the politicians will react to the people waving money at them.)

Insurance companies do have other reasons to dismiss areas as uninsurable - there are way too many cities that allow building in flood plains, and people building expensive vacation homes and tourist hotels on scenic beaches that have been washing away or hit by hurricanes for centuries. And the Internet boom meant that you could work from anywhere in the world you wanted so everybody moved here to the San Francisco Bay Area, driving up real estate prices to ridiculous levels in spite of our habit of having occasional earthquakes, so a lot of insurance companies can’t handle the market-driven increases in financial risk even though housing construction is getting more earthquake resistant.

I used to live on a sand bar in New Jersey. I knew I was renting the place I lived in (because I was); some of my neighbors thought they actually owned something, when actually they just had houses temporarily sitting on sand a couple feet above sea level behind a sea wall that the Army Corps of Engineers occasionally rebuilt.

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I didn’t know that was the name of the series, but yeah, Forty Signs of Rain and its following novels were wonderful eco-fiction.

And in a lot of cases it’s because climate change has shifted the boundary between the flood plain and what is above it.


Well, you can listen to the insurance industry, or you can listen to the climate scientists at the IPCC. Specifically pages 6 & 7 in this report: (note the words “low confidence” and “Long-term trends in economic disaster losses adjusted for wealth and population increases have not been attributed to climate change, but a role for climate change has not been excluded”)

My confidence in AGW comes from the laws of physics, not the claims of insurance companies. As an insurer changing its policy, it’s easier to point to global warming than to admit you underestimated risks that were there all along. There’s a lack of good data when it comes to extreme weather events, so the underestimation is understandable. This is also why it’s tempting to look to the insurance companies for metrics of extreme weather, because there isn’t much else.

Is global warming hurting the insurance industry? Maybe.
Should we stop building without foresight in disaster-prone areas? Definitely.

Exactly. Insurance companies know they’ll have to pay out their policies are already designed with 1, 2 or even 3 years of inclement weather in mind. They don’t need to reprice to cover that. They need to reprice because the inclement weather is becoming standard and the severe weather becoming worse. They’ve got the data already in their own payouts, they most likely can already see the trend.

Insurance companies can prepare for the future by hiking prices to cover more/larger payouts, but if other companies don’t think that’ll happen they can undercut and steal their clients.

Insurance company can also prepare for the future by gaining more clients over larger areas spreading risk among a bigger pool. The best way to do this is to have the lowest rates, so there is an incentive to get the prices right. Too high and they lose clients, too low and they can’t cover payouts and go out of business.

The fact that it appears all insurance companies are doing this either means massive industry wide collusion, or they all agree with the scientists predictions.

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I’m not sure why Cory believes terrorism insurance “is pretty darned cheap.” In fact, but for government intervention, it would be largely unavailable to commercial businesses in the US as it is considered an unpredictable act of war with potentially catastrophic impact (nuclear radiation cleanup duty, anyone?). That is why Congress passed the Terrorism Risk Insurance Act and its successors since 9-11, although many Republicans want to let the program expire and rely on the “market” instead.

On the other hand, weather (not climate) presents an insurable risk because you can predict the general frequency of storms, etc. If you insure across a broad geographic area, you can balance the risks against the annual premiums.

Relevant to this discussion is the fact that the actual statistics indicate that major storms (particularly tornado & hurricane) have not increased – even if media coverage makes it seem that way. Instead, the value of things destroyed by natural disasters has increased greatly and, therefore, insured losses have increased. Insurance companies know this and seek to stay one step ahead by raising premiums and investing the proceeds in long-term portfolios, typically heavily weighted toward commercial real estate.


It’s their responses like this that make me want to solve the mass shooting problems in the States through insurance. Just let everyone have as many guns as they want but require insurance against any possible damages done by you through careless use, storage or sales of those weapons. Why should that good old sucker “The Taxpayer” have to cough up a hundred million or so for the damages from something like Sandy Hook when it can just go on the tabs of people paying the premiums for gun insurance?
Gun owners will jump at the chance to replace wishy-washy liberal ideologues with actuarial tables and hard-assed insurance adjustors! Those boys will do the studies and statistical analysis that the NRA forbids government sources from doing since it will be a bottom line issue for them. If gun ownership indeed decreases your risk of getting robbed or killed and doesn’t increase your likelihood of getting shot with those same weapons or the likelihood that someone else will then that will all come out in your premiums. Works great for cars!

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I want to believe this, but there is precious little actual evidence in the article that the insurance industry actually agrees with climate change. I hate to admit, but I was totally believing this was a brilliant argument until I realized I was just agreeing with myself.

Follow the money. Is it hot out versus the 1930s dust bowl era? Are hurricanes at record high instead of record low intensity? Is Antarctic ice at record low instead of record high extent? Is there any enhanced warming signal to be found in either the longest real thermometer records or tide gauge records? The answer to all of these questions is not controversial, and the answers are no.