Climate change: How to recruit the insurance industry for the battle

Guest Opinion: Floods, fires and other catastrophes will inevitably increase -- and cost us all more, unless we create financial incentives for companies to act smartly. Insurance is one lever we have.
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Washington Insurance Commissioner Mike Kreidler at a 2009 rally in support of health care reform.

Guest Opinion: Floods, fires and other catastrophes will inevitably increase -- and cost us all more, unless we create financial incentives for companies to act smartly. Insurance is one lever we have.

Who said this? “It would seem that the only plausible explanation for the rise in weather-related catastrophes is climate change.” It may surprise you to learn that this is the statement of an insurance company — Munich Re, one of the largest in the world.

Unlike Germany-based Munich Re, insurers in the U.S. are only slowly acknowledging their vulnerability to climate change. Insurance companies have a natural — and critical — role in helping us prepare for the inevitable and mounting impacts of climate change, and hopefully in preventing its worst effects. Their financial exposure makes them uniquely credible messengers. Since they set our rates, they also have economic leverage to prompt changes in our behavior.

Yet just 10 percent of all insurers worldwide, and only two U.S. insurers, earned top ratings in climate change preparedness in 2014 from CERES, a non-profit that advocates for corporate sustainability. And the public appears largely unaware of the insurance industry’s vulnerability to climate change. But if insurance companies aren’t prepared to deal with increasing climate disasters, who will be left with the bill? You, me, and our fellow taxpayers.

The evidence is overwhelming of the risk unchecked climate change poses to insurance companies. The number of global natural catastrophes has risen at a harrowing rate, from an average of 39 disasters in the 1970s to an average of 136 in the first decade of this millennium.  The upward trend in global weather-related losses between 1970 and 2013 is unmistakable, as the following table from another insurance giant, Swiss Re, shows:

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