"Everybody talks about the weather, but nobody does anything about it."
-- Charles Dudley Warner; Hartford Courant, 1897.
The same industry you may have chided for reducing coverage, raising rates and canceling your policy may come to your aid with new products, services and practices designed to offset rising costs associated with climatic change.
Already making inroads on the commercial real estate front with loss-prevention techniques, 'green' building credits, carbon emission credits and the like, the insurance industry is being pressed to generate breaks for home owners as the planet continues to heat up, according to a new report, "From Risk to Opportunity: How Insurers Can Proactively and Profitably Manage Climate Change".
"Although an encouraging start, greater efforts are needed from insurance companies and regulators to get more of these creative programs into the public arena. Most U.S. insurers are not yet experimenting with these products, nor are adequate resources being invested by the government or insurer-funded associations," according to the report's forward, written by Lindy S. Lubber, president of Ceres, a national coalition of investors and environmental groups who aren't debating global warming, but working to address challenges posed by climate change.
RealtyTimes.Com addressed the global warming-home owners insurance issue last month in "Global Warming Contributing To Homeowners Insurance Costs".
Produced for Ceres by Evan Mills, a staff scientist at the U.S. Department of Energy's Lawrence Berkeley National Laboratory, and Eugene Lecomte, President Emeritus of the Institute for Business and Home Safety, the report points to a litany of insurance woes suffered by home owners and suggests some solutions.
- In Louisiana and Florida alone, more than 600,000 homeowners' property policies were canceled or not renewed in the past year. In Massachusetts and New York, insurers canceled coverage for more than 80,000 coastal home owners the past two years, even though it has been decades since the last major hurricane hit the region.
- Insurance-of-last-resort, provided by state governments, for better or for worse, is taking up the slack often with more expensive coverage. In Florida, a $715 million bailout of the state insurance pool helped deal with the insured rolls swelling to 1.5 million policyholders. Mississippi's Wind Pool, which insures coastal property owners, suffered a $745 million loss from Hurricane Katrina, $100 million of which was paid back with a federal block grant.
"The dearth of innovative products that would reduce climate risks and preserve insurability for home owners is of particular concern, especially when considering the hundreds of thousands of home owners who have lost private coverage the past two years," added Lubber.
Skirting the debate that has some hold outs discounting global warming as more of a global doom-and-gloom conspiracy, the report instead addresses what can be done about the very real threat of disasters due to climatic change.
Global warming refers to a recent pattern of accelerated increases in Earth temperatures that are disrupting meteorological patterns and planetary conditions that sustain human life.
The vast majority of climate scientists, including those with National Aeronautics Space Administration (NASA); the National Academy of Sciences (NAS); and the World Meteorological Organization all say global warming is pushing Earth to a state of emergency and fossil-fuel addicted humans, who are also paving over the planet, are part of the problem.
It only follows that humans in a position to do so should take mitigating steps without waiting for the planet to roast or bureaucracy to grind out post-disaster solutions that fall far short.
"Global warming is upon us, and it poses unprecedented new threats to the insurance industry and vast segments of society that rely on insurance for peace of mind and financial security. This summer's wildfires in the Northwest and record-high temperatures and drought in the Midwest are only the latest reminders of the far-reaching impacts that climate change and extreme weather events pose to insurers still reeling from last year's devastating hurricane season on the Gulf Coast," says the report's forward written by Mike Kreidler, Washington State Commissioner and Tim Wagner, director of the Nebraska Department of Insurance.
The report points to efforts in the commercial insurance arena as hope for better coverage for home owners.
- Firemen's Fund Insurance is launching a first-of-its-kind "green" coverage, including rate credits and other incentives, for commercial building owners who rebuild damaged properties using green and LEED-certified (Leadership in Energy and Environmental Design-certified) building practices.
- Marsh, the world's largest insurance broker, and AIG, the world's largest insurer, have launched carbon emissions credit guarantees and other new renewable energy-related insurance products that are allowing more companies to participate in carbon offset projects and growing carbon emissions trading markets.
- Insurer-initiated hurricane loss prevention methods used at nearly 500 commercial locations incurred eight times less damage from Hurricane Katrina than properties that did not make the engineering improvements, avoiding $500 million in property damage.
The report identifies 190 innovative products and services available or in the pipeline from dozens of insurance providers in 16 countries. Many provide dual benefits by reducing both financial losses and manmade greenhouse gas emissions believed to contribute to global warming.
The report already has the attention of the National Association of Insurance Commissioners (NAIC), which formed an executive level task force on climate change last year.
"As the world's largest economic sector, and one that reaches virtually every consumer and business in industrialized countries, the prospect for insurance industry involvement in the development and promotion of climate change mitigation strategies stands as an immense but as yet largely untapped opportunity," writes Lubber.
