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Insuring ourselves against Climate Change

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One of the consequences of Climate Change that will affect everyone, including political parties denying anthropogenic warming, is its impact on property insurance. This recent slew of stories is a harbinger of the desperate search for the deepest pockets when paying for climate-related liabilities (CRL):

There are many unknown unknowns as Climate Change changes our lives, but one thing is for sure in our litigious society: When extreme weather hits and causes lots of expensive damage, someone is going to pay. The media, which deserves a certain amount of culpability because they have not kept the public informed on the local consequences of Climate Change, will most likely be running many stories about these lawsuits as these cases flourish. That’s because few stories attract media attention more than legal blame games.

With Climate Change and insurance the blame game works like this:

Insurance companies go after municipalities for the money to rebuild homes and other properties after a string of frequent extreme weather events because the insurance companies don’t have enough money. And (oh, by the way) it turns out that it’s cheaper to sue the municipalities rather than pay out large sums to those who paid an insufficient amount for insurance coverage. But the municipalities don’t have the money either to pay out large sums for extensive damage due to Climate Change. They don’t have the money because the public too often votes back into office climate deniers who don’t believe in Climate Change and promise to cut taxes. These deniers see no need to prepare the public or their budgets for something they believe doesn’t exist.

The insurance companies don’t have the money to pay the folks who paid for their policies because the insurance companies, which tend to use historical data to decide how to charge their clients, are insisting that Climate Change doesn’t count as a CRL because Climate Change disasters only occur in the future—and increasingly, the present, as the National Climate Assessment (and many other climate studies) prove Climate Change is happening right now.

So now insurance companies have discovered a new trick, making use of the language in a municipality’s climate action plan (if it has one) to prove that municipalities must have known about CRL’s beforehand, didn’t prepare adequately, and are thus liable. (Maybe these legal gymnastics explain why so few municipalities have climate action plans. Hummm…)

Lawyers are going to make out great.

But because we have allowed the merchants of doubt to lull the public into thinking Climate Change is a hoax, the bill is coming due, and no one is going to be in a position to pay it. Insurance companies cannot pay, governments cannot pay, and, of course, individuals cannot pay. People purchase insurance policies in the first place because of the overwhelming expenses involved with unforeseen and even foreseen damages. Further, these extreme weather events tend to be difficult to insure because everyone in a specified region gets nailed, so there’s no way to bring in enough funds to pay for massive damages.

So, what’s the way out this financial and environmental nightmare? Planning. Some of the ‘heavyweights’ in the insurance industry already realize the potential threat to our environment and their industry because of Climate Change and are starting to plan ahead.

Insurance leaders pack climate punch The heavyweights of the global insurance industry, well aware of the risks posed to their finances by extreme weather events, have made a renewed commitment to use their financial clout and influence to tackle the climate impacts of a warming world | It might have the reputation of being rather a dull − some might even say boring – business, but there’s no doubting the insurance industry’s financial muscle. The Geneva Association − a leading international insurance thinktank, whose members have total assets of nearly US$ 15 trillion − has been meeting in Toronto, Canada. And the focus has been very much on climate change. The Association, issuing a climate risk statement calling for urgent action by governments and other bodies, said: “The prospect of extreme climate change and its potentially devastating economic and social consequences are of great concern to the insurance industry.” Those putting their names to the document – 66 chief executives of the world’s leading insurers − commit themselves to a set of guiding principles on what they describe as the substantial role the insurance industry can play in tackling risks related to climate change. (May 23, 2014) Climate News Network

Such planning is a hopeful sign. There’s much that the insurance industry can do to fortify their assets for the payouts ahead, including investing in industries that will help us to adapt and mitigate Climate Change.

But however massive the collective assets of insurance companies might be, they still won’t be able to insure the world against Climate Change. The only way to do that is to make sure we don’t put climate deniers into office. Our governments are the insurers of last resort. They’re the ones who come to help with planes and trucks and food and boats and expert personnel and pockets deep enough to handle such emergencies that a climate in extremis will bring. But governments cannot insure its people if an office-holding denier has not prepared their country.

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