What role, if any, should the insurance community play in the debate over global warming? It's a proper question, given the pain weather has caused the industry and its customers this past year. According to ISO and PCI, the nine-month total for cat losses through the third quarter of 2005 totaled some $50 billion, largely direct losses from Hurricanes Katrina, Rita and Wilma.
And so it's curious that business by and large opts not to weigh in on so monumental an issue.
A cursory search of major agent-broker and company trade association Web sites yields barely a word on the matter. There's conversation enough about relief and natural disaster catastrophe programs, and about taking a "hard look" at exposures, pricing, underwriting, reinsurance arrangements and capital requirements. But on the larger question, the industry is conspicuously quiet.
That it shouldn't be was, in effect, argued by Elizabeth Kolbert in the September 19, 2005, issue of The New Yorker. Kolbert, who has written a recent book on the issue, said the larger statistical pattern of global warming is of "deep interest" to the insurance industry.
She pointed to an Association of British Insurers' report forecasting losses from hurricanes in the United States, typhoons in Japan, and windstorms in Europe were likely to increase by more than 60 percent in the coming decades. The report said insured losses from "extreme" storms could rise to as much as $150 billion.
"The figures did not take into account the expected increase in the number and wealth of people living in storm-prone areas; correcting for such increases, the losses are likely to be several hundred percent higher," Kolbert wrote.
The National Association of Insurance Commissioners reported before Katrina that catastrophe weather-related losses here were rising significantly faster than premiums, population or economic growth. NAIC at least took note of the problem, but its report, alas, was to be delivered at its canceled meeting in New Orleans.
Look, we're not completely in the dark here. Though hurricanes, to take one example, are complex, we know they draw their energy from the warm surface of the ocean. We know the warmer the water (the temperature of the sea surface has been rising for some time), the greater the amount of energy available for them to grow and therefore the more severe, and perhaps the more frequent, hurricanes and storm surges like those that swallowed New Orleans are likely to be. We know that holes in the ozone layer and the general heating up of the earth's atmosphere from greenhouse gases are causing the problem. And we know that global temperatures are as warm as they've ever been and are forecast to remain so for some time.
We know all that, so why don't we do something about it?
The fact is that the United States is the world's biggest emitter of greenhouse gases, and its government is among the biggest resisters to solving the problem. The Bush Administration early on withdrew from support of the Kyoto Protocol and has, at this writing, allegedly tried to silence a top climate scientist at NASA who called for speedy reductions in emissions of greenhouse gases, amid fears that it may already be too late.
The world needs all the help it can get to solve this problem. Few will suffer more from failure to do so than the world's insurance business.
It's an issue agents and brokers, among others, should warm to--especially if they really want to represent the interests of their clients.
TOM SLATTERY, a veteran editor and writer on industry affairs, writes on broker/agent issues every month.
March 1, 2006
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