On Friday, the daily online news service from
The National Underwriter, the leading weekly trade journal of the U.S. insurance industry included the following article, titled "Climate Change Heating Up Issues for Insurers".
The impact of global environmental changes on business and people can have far-reaching consequences for the insurance industry, said a group of experts discussing the results of a recent study released this week.
The study, titled "Climate Change Futures: Health, Ecological and Economic Dimensions," was released Monday during a press conference held here at the Museum of Natural History. It is a collaborative effort of Swiss Re, The Center for Health and the Global Environment at Harvard Medical School, and the United Nations Development Programme.
and continues
The research discusses the existing and future costs associated with environmental changes and related chronic health conditions.
The impact of climate change will affect the health of nations, ecosystems and even the sustainability of the global economy, Jacque DuBois, a member of the executive board of Swiss Re Group and chairman of Swiss Re America Holding Corp., said in opening remarks.
Given the ferocity of hurricanes in the last two months, the collaboration underscores the need to look at the bottom line, according to Paul Epstein, associate director of the Center for Health and the Global Environment with Harvard Medical School.
That bottom line, he said, includes health issues as well as business issues. The upside, according to Mr. Epstein, is that the world health, financial and investment communities may be able to turn clean energy into an investment opportunity that will benefit the environment and present practical business benefits.
Swiss Re believes that clean energy is tied to the sustainability of business, according to Ivo Menzinger, head of sustainability and emerging risk management at Swiss Re.
Among the reasons he cited were Swiss Re's risk transfer business and the impact of long-term trends on claims the company might have to pay.
In addition, he said that as a large institutional investor, a change in climate could impact the sustainability of a company or an industry.
Mr. Menzinger said Swiss Re is committed to "greenhouse neutral" status by 2013. The status, he explained, is a combination of reducing emissions by 50 percent and investing in carbon dioxide-free causes. ..."
This even made the life and health edition of the news service with the emphasis in that article being the impact of climate change on mortality and the value of an insurer's investment portfolio.
While there have been sporadic discussions of global warming an insurance in the trade press and here (e.g., http://www.dailykos.com/...), this is the strongest statement I have seen on global warming as it relates to the insurance industry.
What is important is that market forces may finally be coming to bear on the problem of global warming. While altruism and government action are necessary to deal with issues that our economic system can't, it is all the better when market solutions can be at least partially deployed. (For example, no matter how scared one may be of global warming or peak oil, there is nothing that focuses one's attention like $3 gas.) At last, the insurance industry is waking up to the fact that it is entirely in their economic self-interest to do what they can to minimize human-influenced climate change.
Some notes on the dynamics of Swiss Re's announcement. First, "Re" is short for Reinsurance. Reinsurers provide the insurance for the insurance companies you and I deal with every day. While there are many different types of reinsurance contracts, the easiest to understand is catastrophe reinsurance. For a particular premium, reinsurer A will assume all the obligations of insurance company B which exceed $X arising out of a single event. Consequently, reinsurers will bear a disproportionate amount of the loss for headline-making events. (Although in some instances the largest primary insurers may not have reinsurance--e.g., Allstate did not have reinsurance for non-Florida Gulf Coast this year.) Moreover, reinsurers operate globally (in an effort to spread out the risk), so they are affected not just by Atlantic hurricanes but by Pacific typhoons, European floods, etc. Reinsurance is largely based in Europe, London or Bermuda (with Warren Buffet's General Re being the only notable American reinsurer), so I suspect that European perspective would make them make them more willing to embrace global warming than the typical American executive.
I'll keep an eye out to see if Swiss Re's action resonates with American insurers, who would be better positioned to exert both political and economic pressure for solutions to global warming in this country. It would certainly make sense. Insurers don't want: a) rapidly increasing loss levels that makes insurance unaffordable and/or brings political resistance to approval for rate increases, or b) unpredictable losses. They especially don't want b). Climate change will bring about both a) and b).