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Public Radio's Environmental News Magazine (follow us on Google News)

Stormy Trends: Is Weather Getting Uninsurable?

Air Date: Week of

Insurance companies have suffered record losses in recent years as a rash of severe storms have swept the planet. Some insurers are getting involved in the debate on human induced climate change, and may call on national governments to take preventive action. John Keefe files this report.


CURWOOD: Computer models are designed to predict the future. But we don't need models to tell us what's going on right now. The Earth's average temperature is going up. The hottest years on record have come in the last 15 years; the upward trend was interrupted only by the Pinautubo effect. What we can't say for sure is that humans are responsible. Again, Dr. John Firer.

FIRER: The difficulty we have is that the global average temperature wanders around a lot all by itself without any help from people. The warming that has been observed is in the right direction and within the range of model predictions. But it is not yet large enough so that one can say for sure that it is caused by the addition of carbon dioxide and other greenhouse gases. And that's something we have to live with, because we don't have any other way to check the final results until it happens.

CURWOOD: Still, there are clues. For example, one researcher recently noticed that the normal turn of the seasons started to shift around the world, at the same time that humans started dumping large amounts of carbon dioxide into the atmosphere. Changes in deep ocean currents and temperature also appear to be linked to increased carbon dioxide. John Firer says the finger of responsibility is turning toward us.

FIRER: Whenever a government or United Nations tries to assemble the best group of scientists they can to summarize the present state of the science, they always come to the same conclusion; it's happened 7 times in the United States with 7 different committees. It's happened in the United Nations 3 times. With minor differences they all say the same thing: we see no reason not to believe the models.

CURWOOD: But note Dr. Firer's double negative. He admits it's a device scientists use when they want to hedge. And it appears a hedge is as good an answer as we're going to get. In a civil court, the weight of the evidence is enough to decide a case. A criminal court requires a higher standard: proof beyond a reasonable doubt. But in hard science, proof means beyond all doubt. If we are the culprit in global warming, absolute proof may remain elusive for decades. So, what course should we set in the meantime? That's where many scientists step aside and hand off to government leaders.

(Music up and under)

CURWOOD: The biggest factor weighing in against taking strong steps on climate change is money. As we've said, many politicians and business leaders argue that converting from oil and coal could be enormously expensive. But there are also potentially huge costs to moving too slowly; and at least one industry thinks it may already be paying for the effects of climate change. The insurance business has been hammered by huge, weather-related losses in recent years. And many in the industry think it's more than just a run of bad luck. As John Keefe reports, insurers may be taking a more aggressive role in the climate change debate.

(News broadcasts. A man speaks: "The wind has blown in the windows on one side and the hurricane..." Fade out; fade in woman's voice: "The center of Hurricane Andrew is now in the Gulf of Mexico headed for the American Gulf Coast..." Fade out; fade in man's voice: "...everything that could stand up was on the ground..." Fade out; fade in man's voice: "The storm has blasted the roof off a high school in Patterson where 120 people took refuge..." Fade out; fade in President Bush's voice: "I will be declaring today that Florida is a disaster area..."

KEEFE: When Hurricane Andrew ripped through the Bahamas, South Florida, and Louisiana in August of 1992, it cut a $16.5 billion swath in the world insurance market. Many insurers paid out far more than they took in for hurricane coverage, and 6 companies folded in the storm's wake. Before 1989, no natural disaster cost the insurance industry more than a billion dollars. In the last 6 years, Andrew was just 1 of 15 to top the billion dollar mark. Others include Hurricane Hugo, the Midwestern floods of 1993, and 2 wind storms in Europe. Increasing development and rising property values account for some of the higher claims, but the sheer number of weather events is up as well, and that has rattled an industry built in part on the careful study of climate history. Now, some insurers are taking a serious look at whether climate change has contributed to their losses. Richard Keeling is an underwriter at Lloyd's of London.

KEELING: We started getting concerned, you know, why was this happening? Now, we employ climatologists who would say, you know, this could be just a natural cycle and we've hit a rather nasty run of catastrophic losses. But privately they turn 'round to us and say look, we can't prove it at the moment, but the body of opinion is growing quite considerably that the world is getting a more dangerous place.

KEEFE: Warning signs also came from 2 other European firms, Swiss-Re and Munich-Re. These re-insurance companies play a large role in the worldwide business of insuring insurance companies, and have a stable of researchers studying climate. Sarah Goddard has covered the global warming issue for Lloyd's in-house magazine One Lime Street. She says that in 1990, Swiss-Re scrapped earlier predictions of weather stability, and warned that climate change may be responsible for the industry's record losses.

GODDARD: Now, in the same year, Munich-Re also published a specific report entitled "Wind Storm." And in that one, they said, and I quote, "For the first time in the history of our planet, mankind is about to change the climate significantly and possibly irreversibly, without having any idea of the consequences that will have." That's a very strong statement to come out of one insurance company.

KEEFE: Such statements are understandably welcomed by environmental groups, and Greenpeace scientists have met with insurance representatives to discuss climate change. They see the industry as a potential trillion dollar partner in an effort to slow global warming. Companies could, for example, place their huge financial holdings into climate-friendly investments, or they could promote alternative fuels and more efficient building codes in the same way they pushed for automobile air bags and fire codes. Franklin Nutter, President of the Reinsurance Association of America, says such measures would be premature. Still, he says, there may indeed be room for change, as insurers review how they rebuild weather damaged areas.

NUTTER: To the extent that the industry finds that there are energy efficient ways to do that same thing, to achieve those same goals, and have a positive effect on global warming or greenhouse gas emissions, it seems to me a win-win for everyone. For the industry in making a contribution that may not have a dollar effect on its bottom line, but may have very much of an effect long-term on weather events.

KEEFE: But in general, insurers are wary of taking any action based on climate change. Again, Richard Keeling at Lloyds.

KEELING: At the moment the insurance business of the world has not really made up its mind whether this is a serious threat or not. You find funny enough in Europe, people taking it much more seriously than I think in America.

KEEFE: In America, Vice President Gore last month asked a group of insurance executives to look at climate change issues from their industry's perspective. The group will bring insurers and scientists together to discuss all sides of the issue and will report back to the Vice President later this year. For Living on Earth, I'm John Keefe in Washington.



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