Insurance industry pricing climate risk as a dead certainty


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.


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!


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.


Hey, the exact same two charts again. Rather than go through the exact same discussion, let me simply point out that Nik brought these up on this thread, and some others this one. There you can find what criticisms people like myself had, what answers he gave, and so generally judge if there's merit to what he brings up without repeating it all.

Climate change and the point of no return

I do know that in recent years, the flood zones in our area have been redrawn to reflect ocean incursions further inland in case of storm, etc.


...but how is Nik supposed to know how superlatively witty my own personal retort is on this exact occasion?

Honestly, if I'm going to stop using mindlessly repeated talking points as an opportunity to show off how clever I am, why do I even have an internet?


I remember this from many years ago. The insurance industry was the first to start confronting reality out of pure necessity while the rest of industry sat on its slothy, corrupt hands to continue to milk the current infrastructure. I'm happy to see this finally come to the forefront. Of course, this won't change anything for deniers, but nothing ever will. They're mentally locked in.


European reinsurers exhibit minimal social conscience and try to reduce the risk of catastrophe. Their US counterparts keep their mouths shut and simply adjust their tables to continue to make a buck. Why is this so unsurprising?


Okay, not to quibble, but in my experience, not trusting insurance companies has merit, in general, but it doesn't mean that you don't believe in global warming.


Eduardo Porter gives a good example of politically biased confusion between since-driven and market-driven behaviors.


It's worth noting there is a difference between observing that temperatures have increased over the past generation and attributing it to a specific cause.


It will be humorous (and sad) how, in the future century, how politicians and deniers will discuss all these heightened weather effects all the while still refusing to admit their cause. Eg, even as they are suffering rising sea levels, they'll talk about it as rising sea levels only, and not what's causing it (I mean, who really knows, right?)


That's the thing; there are people out there who, for whatever reason, trust businessmen more than scientists. So, okay fine... hey, look, businessmen! Believing in global warming! And betting actual money on it! NOW can we install some more wind farms?


It doesn't appear with current trends that we will see more politicians and "deniers" dismissing AGW in the future. Considering that many governments/politicians the world over have already created numerous policies to limit the output of human sourced GHG's. The trend is towards more regulation, taxation and restrictions - not less.

This is why we continue to see auto-manufacturers focus on their reduced CO2 emissions...or companies touting their use of solar/wind/green energy breaks for solar panels in residential/commercial breaks for green cars etc...etc..etc...

This isn't because the politicians of the world are deniers. These are policies set in place to encourage the use of green energy.

A century from now we'll have far superior data, models and evidence to support, contradict or even possibly create new hypothesis about AGW, climate change and GHG's.

I know I know by then it will be "too late" and the world will fall into some deadly cycle of becoming the next Mars or some shit like that.

Ultimately I think there are some that dismiss AGW, some that accept it but are skeptical of government reactions to the phenomenon, others that claim the sky is falling and others still that think its a big hoax/conspiracy.

We'll see what comes...humans are a rather inventive species.


It's interesting to see how views shift when people have to put their money where their mouth is, so this is a good take on the matter.
Slightly off topic, I have always been perplexed why people put the "A" in "AGW". Why does that matter? Surely what matters is whether anything can be done, not who or what was to blame? So the real discussion should be about the extent to which humans can affect the climate in the direction they want to.


What causes it has pretty big influence on what you can do about it. If it's caused by industrial CO2 emissions your remediation efforts might be a little different than if it's caused by an increase in solar activity.

Pointing out that it's caused by industrial CO2 emissions is one way to hopefully decrease the amount of industrial CO2 emissions. Not sure I understand why this is such a mystery to you.


On the other hand, even if the cause isn't human activity, it seems like it would still be a good idea to curtail human activity that could exacerbate the problem, such as adding CO2 to a warming system.


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