The insurance industry prepares for climate change

The insurance industry prepares for climate change

Interview with Evan Mills.
With the hurricane season about to start and Americans growing more exasperated with the failed recovery in New Orleans, expect a reenactment of last year’s debate over whether global warming is causing a proliferation in the number of large hurricanes like Katrina. More papers are now working their way through peer review to further solidify the link between climate change and large hurricanes, but insurance executives are one group not interested in joining this spat. They grow more and more nervous as the increased frequency in natural disasters cuts into their profits.

LBNL
Evan Mills
The Association of British Insurers finds that weather-related losses now outpace trends in population growth and inflation. The association’s analyses have identified changes in weather as the driver of a 2–4% annual increase in U.K. property losses.
Economists and business leaders are also taking notice. When the U.S. delegation failed to engage in efforts to curb emissions of carbon dioxide and other greenhouse gases (GHGs) during climate talks in Montreal last December, a group of 25 economists—including 3 Nobel Prize laureates and 1 former member of the President’s Council of Economic Advisers—urged President Bush to drop his opposition to cuts in carbon emissions.
The rising costs from weather damage and agricultural losses far outweigh the price of curbing emissions, the economists wrote to Bush. Geoffrey Heal, an economist with the Columbia Business School, told the Financial Times, “The cost of implementing the Kyoto Protocol is about 1% of GNP. That is about two quarters of growth.”

As the world’s largest industry, the insurance business faces more financial risk from global warming than any other sector of the economy. To better understand how business leaders are dealing with the dilemma, ES&T spoke with Evan Mills, a staff scientist at the U.S. Department of Energy’s Lawrence Berkeley National Laboratory......