Climate Change: Can the Insurance Industry be saved from Bankruptcy?

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“The reinsurance industry insures insurance companies to help reduce risk associated with underwritten policies. Insurance rates have risen in areas with extreme weather events.

Frank Nutter, President of Reinsurance Association of America, says climate change is a big factor for reinsurance and insurance companies.

“The consequences of climate change are quite real to our industry and it will have a significant impact on the economy going forward,” he says.

From the underwriters’ perspective, encouraging people to build on coastal areas, barrier islands and other high risk areas inevitably raises the risk level and the exposure not only by property values –including high value homes — but by the cost of repair and recovery of property and public infrastructure.

“The cost of climate change has to be factored in both in public and private insurance,” Nutter says. Also of concern – wildfires exacerbated by climate change that expose more and more homes and businesses to losses covered by insurance of federal disaster assistance.

Nutter calls for a long-term investment in mitigating losses, better land use planning, better building codes, the greater use of green infrastructure to protect properties and a change in philosophy in government.”

Link TV: “Paying for Climate Change: A Reinsurance Industry View”

7 Responses

  1. Great post, it is interesting to see the kind of ripple effect that when someone declares bankruptcy it effect more people than just them!

  2. The obvious right wing solution. Bankruptcy insurance as an off balance sheet company. Pseudo insurance companies that collect premiums and only actually cover normal risk. They claim to cover mass flooding but the real business plan is to take those insurance premiums siphon them all off to send to the parent company as management fees and then when there is a mass flooding event declare bankruptcy and the parent company keeps those management fees.
    If you don’t think that is exactly what they plan to do, then you have a very naive view of modern corporations. Insurance companies do not go bankrupt when they do not provide cover and as sea level rise is an over time risk, they simply cease to provide annual cover when the risk becomes to great. You can pay for a decade and find that whoops you decade disappears because they know from here on in, the risk of flooding simply becomes to high and hence they shuffle you off to an off balance sheet sub-unit designed from the get go to go bankrupt.

  3. The pitiful state of American comprehension about climate change is illustrated by the fact that this post is one of the first and not the thousandth or millionth about why climate change isn’t just about a quicker tan. There is no fund or entity large enough to cover losses of US shoreline property and business. And, interestingly, it will pit the rich with their most expensive view houses against insurance. Neither the insurance “industry” nor the government can compensate for the magnitude of losses that are not merely possible but increasingly predicted. There is no governmental ability anywhere on earth that will be able to handle the environmental refugees, including Americans, as the earth changes under human feet. What will Florida’s presidential vote be in 2040 or 60 or 80? Depends how much is left of it. The only planning that can be done is to cut corporate losses, just one of which Robert mentions. You will be able to gauge how useful the next presidential candidates will be as president by how often they mention climate change, and what they plan to do about it. You might make your plans accordingly.

  4. jamesL, Florida will be just fine. The Governor has decreed that no state employee can use the terms “climate change” so the problem is fixed.

  5. Whoops, time for the Tea Party to add the Reinsurance Association of America to the list of Commie class-traitor companies, along with General Motors, Chrysler, Tesla, and the entire solar and wind power industries.

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