A few links and comments about how the insurance industry is treating the issue of climate change. Given that they are badly exposed if there is to be a say increase in severe weather events, the insurance industry is taking this issue pretty seriously. For example this report from Lloyds highlighting amongst other things the risk of increased Atlantic hurricanes.
There is clearly a strong correlation between ‘warm’ phases of the cycle and more intense hurricane activity. On this basis, the intense hurricane seasons in 2004 and 2005 can hardly have been a surprise as warned in 2001 by academics.
Current high Atlantic sea surface temperatures are of particular concern for the North American economy and for the insurance sector, given the resultant insurance exposures. Recent temperatures are probably outside the range of past oscillations, and seem to suggest we will be caught in an upward cycle for some time to come. It is now vitally important that we monitor and keep pace with scientific developments going forward.
In the US insurance companies are refusing to insure costal properties because of increased chance of hurricane. From a recent Economist article (subscription only)
Last year, after an already poor 2004, storms caused a record $54.8 billion of insured losses, according to the Insurance Information Institute, an industry group. Of these, Hurricane Katrina alone accounted for more than $38 billion.
Stung, insurers are cutting back their exposure in coastal areas. Allstate, one of America’s biggest property insurers, has stopped writing homeowners’ policies in Florida, Louisiana and parts of Texas and New York. State Farm, another big insurer, has not renewed some policies. In April Poe Financial, Florida’s fourth-largest personal insurer, collapsed, leaving 316,000 policyholders in need of coverage. A new report by Fitch, a credit-rating agency, calls Florida’s insurance market “extremely fragile”. Further north, this month National Grange began telling customers on Cape Cod, in Massachusetts, that it would not renew their policies.
This is mostly a rehash of a comment of mine at LP