Global climate change threatens the insurance industry

When winds reach 120 miles per hour, houses begin to crumble, walls break and roofs fly away. With global climate change, winds like this are coming more often. In the United States during the last three decades, the number of weather-related natural disasters has increased five-fold. Last year was the second-hottest year since records began in 1860. This means five times as many major hurricanes and tornadoes annually touching down in places like Miami and Houston. It means 500 percent more floods, mudslides, hailstorms, droughts, ice storms and wildfires. It means more wrecked cars, houses, crops and businesses.
The industry to be hardest hit by these careening catastrophes is insurance. According to the Department of Energy, insurance losses from natural disasters have increased 15-fold since 1960, even when corrected for inflation. Carlos Joly, the chairman of the United Nations Environment Program's insurance industry initiative, says, "The threats to our economies and lifestyles from climate change are no less consequential than terrorism." He adds that the danger is much more commonly accepted among European insurers than among American providers.

Before Hurricane Hugo in 1989, no major storm had cost more than $1 billion in insurance claims. In 1992, Hurricane Andrew hit South Florida and the insurance industry paid out $15 billion. Allstate Insurance dispensed $500 million more than it had ever collected from all types of insurance in Florida. Seven other companies went bankrupt.

Franklin Nutter, president of Reinsurance Association of America, says, "The scientific community's consensus is we're in a period of warming and weather variability. Climate change will affect property and human lives."

In the 1960s the average was 16 "large" weather-related disasters annually in the world. Now, the average is 72. The combined insured losses, corrected for inflation, have jumped from $7 billion to more than $90 billion.

Since Hurricane Andrew, there have been 18 other natural disasters costing more than $1 billion each. Insurance industry profit has narrowed nearly six-fold in the last decade, sending the $2 trillion industry into shock.