Climate change insurance task force planned

The U.S. National Association of Insurance Commissioners (NAIC) recently agreed to establish a task force examining the impact of climate change on the insurance industry and consumers.
The force will focus in on how the warming climate may affect insurance availability and affordability as well as the financial health of insurers. Necessary actions enabling state regulators and insurers to mitigate and otherwise respond to these problems will also be considered.
The task force will be led by Tim Wagner, director of the Nebraska Department of Insurance, and Mike Kreidler, insurance commissioner for the State of Washington.
“It’s becoming clearer that we are experiencing more frequent and more powerful weather events that pose huge challenges for the insurance industry,” Wagner said. Wagner references an increased occurrence of extreme weather concerns including drought, tornadoes, brushfires and severe hailstorms.
The NAIC’s action rides the wake of back-to-back catastrophic hurricane seasons, which caused record insured losses of US$30 billion in 2004 and as much as US$60 billion from Hurricane Katrina alone in 2005.
A Dec. 2005 study by the national coalition of institutional investors and environmental organizations Ceres investor coalition, reports U.S. insurers have seen a 15-fold increase in insured losses from catastrophic weather events in the past three decades. This increase has far surpassed the growth in premiums, population and inflation over the same time period.
The study, ‘Availability and Affordability of Insurance Under Climate Change: A Growing Challenge for the U.S.,’ warns of larger financial losses in the years ahead if climate change trends continue and no actions are taken to face the challenge.
In response to this concern, the task force will determine if insurers have adequately factored severe weather occurrences into their financial and risk models.
A continuation of severe and unpredictable weather events may hinder insurance availability and costs.
“Insurance as we know it is threatened by a perfect storm of rising weather losses, rising global temperatures and more Americans than ever living in harm’s way,” Andrew Logan, insurance program director at Ceres, says. “Insurers have failed to adequately plan for these escalating weather events that scientists predict will intensify in the years ahead due to warming global temperatures. That’s why we’re pleased to see regulators taking stock of these impacts as a first step toward engaging the industry in the effort to support solutions.”
Nancy Skinner, US Director of The Climate Group says changing weather patterns such as more intense rain or ice storms and lower snow levels can also have big impacts on insurance. For example, homeowner claims will rise as a result of floods and business claims will rise when the ski season ends early due to lack of snow.