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November 30, 2015 at 07:00 PM
Delegates from the United Nations gathered in Paris in December to discuss ways to limit global warming to less than 2 C (3.6 F). That’s a tall order, particularly when previous conferences undercut targets, weakened objectives and then failed to make them binding — and when leaders of at least one of the major participant countries loudly express doubts that climate change is occurring, even as some research indicates it may already be too late to keep the temperature rise below 2 C.
The insurance industry will be affected by the conference’s outcome one way or another. While the largest insurers, particularly those outside the U.S., are increasingly vocal about the need to act, others are not so proactive.
In a speech at the Association of British Insurers in London at the end of October, UN Framework Convention on Climate Change Executive Secretary Christiana Figueres said insurers aren’t prepared to face the escalating costs associated with climate change and that the conference isn’t going to change that.
“This system is already overloaded, and from an insurance perspective, I would say all alarm bells are ringing,” Figueres said. “The insurance sector is perhaps ready for some natural disasters, but it’s not ready for climate change, which is a systemic threat.”
That threat can carry over from higher costs for property and casualty insurers to added risk and expense for life and health insurers.
In the U.S., an April report by the SmarterSafer coalition, which comprises big insurers, consumer groups and environmental advocates, said that the U.S. needs to become more proactive in its disaster policies, spending more on the front end on pre-disaster mitigation and protecting infrastructure so that when disasters strike, the costs of cleanup won’t be so high.
The report said that states rely too heavily on the Federal Emergency Management Agency (FEMA) to bail them out financially after a natural disaster, without trying to prevent damage and thus lower the risks insurance companies must take on.
