As we trudge our way through the second gray, rainy, snow-less winter in a row, it’s easy to see that climate change isn’t just the stuff of myths–it’s affecting every one of us (even if it’s just by preventing us from our annual ski trip or snowman-making contest). More evidence of global warming lies in the extreme weather the U.S.–and the rest of the world–has experienced over the last few years (think of the large amounts of wildfires, destructive storms, earthquakes, and giant waves). It’s impossible to deny that the Earth’s climate is changing but, luckily, the insurance industry is also changing in order to adapt with it.
Insurancenetworking.com reports: “‘Weather- and climate-related insurance losses today average $50 billion a year. These losses have more than doubled each decade since the 1980s, adjusted for inflation,’ says Evan Mills [author of “a new study receiving attention in science journals claim[ing] the insurance industry is beginning to expand its efforts to accommodate for climate change” and] a scientist in Lawrence Berkeley National Laboratory (Berkeley Lab)’s Environmental Energy Technologies Division. ‘Insurers have become quite adept at quantifying and managing the risks of climate change, and using their market presence to drive broader societal efforts at mitigation and adaptation.’”
A major finding of Mills’ study is that “internally, insurers, catastrophe-loss modelers and partners in the research community have been using analytics to quantify and diversify their exposure to climate change risk, more accurately price and communicate risk, and get adaptation and loss-prevention efforts up and running.”
In fact, the insurance industry, besides changing to keep up with the global climate, has given large amounts of money–literally billions of dollars–to fund emissions-reduction technologies, securities, and financing ($23 billion, to be exact) along with $5 billion in funds with environmental screens, “seeing risks to investments in polluting industries and opportunities in being part of the clean-tech revolution.”
Mills’ study also found that there are several insurers who seek to establish carbon-neutrality by reducing their greenhouse gas output and purchasing offsets. Not only that, but at least 26 different insurers claim to have achieved a hard-won carbon-neutral state. Pretty impressive for an industry whose first priority isn’t necessarily related to going green.
It seems that insurers are so keen on doing their part for the planet, in addition to keeping up with servicing customers affected by climate change, due partly to the fact that they’ve had a proverbial dog in this fight for so long. Insurance industry interest and involvement in climate change–specifically with the Intergovernmental Panel on Climate Change–dates back at least twenty years. And for good reason.
The fallout experienced as a result of Hurricane Sandy on the U.S. Northeast region is the latest, and one of the most major examples of what climate change can bring to the P&C industry in terms of challenges (think: helping clients who lost everything, having a massive amount of affected clients, and the sheer amount of money involved in insurance payouts as the result of one weather event).
In wake of this “superstorm,” the insurance industry is more determined than ever to make sure it’s prepared for anything. In an ever-changing world, the insurers are keeping up in order to stay on the ball–for the sake of their place in the industry and, most of all, for the sake of their clients.