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Insurance and Global Warming

flood_truck.jpg The global insurance industry leads the corporate world in acknowledging the reality of climate change. As we've noted before, the insurance industry (and the re-insurance companies, who insure the insurers against catastrophic claims, in particular) will bear the brunt of any global warming disasters; it's entirely in their interest to examine the science behind global warming as closely as possible, and not to play political games.

European and Japanese insurers are moving faster in this regard, but an article in today's Washington Post demonstrates that American insurance companies are starting to wake up to global warming, too. "A New Worry For Insurers," linked (for the moment) from the front page, argues that insurance companies' growing acceptance of global warming is a manifestation of the post-Katrina era. Although it goes a bit too much into the tiresome "he said/she said" type of journalism, it does give a welcome look at how attitudes within the US insurance industry are evolving:

American International Group Inc., the largest U.S. insurer, says it recognizes the possibility that climate change might be increasing insurance losses, though it is awaiting more scientific proof of a link. The New York-based company is considering a policy of targeting investments toward companies involved in mitigating greenhouse gases.

"We take the possibility seriously and efforts to address it seriously," said Chris Winans, an AIG spokesman. [...]

In Nebraska, a series of droughts in recent years have devastated crops and local economies, draining a tax-funded crop insurance program and leading insurers to ask whether global warming is implicated, said L. Tim Wagner, Nebraska's insurance commissioner.

"It's more than hurricanes," Wagner said. "We're just seeing changes in weather patterns."

One interesting sign of the degree to which global warming is on the insurance industry's agenda is the prevalence of the term in industry publications. The Insurance Journal, for example, has published over 130 articles on global warming since 2000, about half in 2005 alone.

Still, it's the European re-insurance companies that are taking the lead. As we noted just a couple of weeks ago, Swiss Re has pledged €20 million towards a €250 million fund to support investments in clean energy. Swiss Re was also behind a documentary series called The Great Warming, which appeared on the Discovery Channel earlier this year (and has been shown around the world). Both Swiss Re and their major competitor, Munich Re, have abundant material on their websites concerning the science and policy issues surrounding global warming.

This is in stark contrast to the American insurance companies. American Insurance Group, mentioned in the Post article above, doesn't have a single entry for "global warming" or "climate change" on its corporate website -- nor does The Hartford, Allstate, State Farm, of Mutual of Omaha. In fact, I couldn't find any US insurance company talking about global warming or climate change on its website, not even on the website for the Reinsurance Association of America.

Of course, this might be different had the Fall 2005 National Association of Insurance Commissioners conference happened. Tim Wagner, mentioned in the Post article, was set to lead a symposium on the effects of global warming. Unfortunately, the meeting was scheduled for the beginning of September, in New Orleans.


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