The insurance industry does not agree that Sandy was evidence of climate change.
Story submitted by Robert Bissett
I happened to be listening to NPR this morning through my pillow speaker. I was only half awake. Even so, the first balanced reporting about anything to do with climate change on NPR made an impression. Uncharacteristic, but refreshingly candid, admissions of truth were made.
The insurance industry is constantly updating their risk models as new information comes to light. Billions of dollars are at stake. Estimate the risk too high and you price yourself out of the market. Estimate too low and the volume of claims could bankrupt you. Insurance companies are highly motivated to discover what’s going on with the climate. Political correctness and flimsy climate models carry little weight in this arena.
The story began by quoting the head of Geo Risks Research: “We believe that climate change is a big problem and will drive losses in the future.” The expected standard line. But, he also admitted that evidence Sandy was caused by climate change does not exist! At that point I began to listen more closely. Risk-management consultant Karen Clark pointed out that after Katrina “some” predicted more powerful storms could be expected because of the warming climate, which she pointed out has not happened. The president of Eqecat, a risk-modeling firm, said we are actually in a low period of hurricane activity. Something you would never know from the media.
Maybe the judgment of insurance companies forced to face reality is a better measure of climate change than pal reviewed papers.
http://www.npr.org/2012/11/04/164185424/insurance-companies-rethink-business-after-sandy
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I bet you insurance company actuaries are closet sceptics.
That can’t be NPR; I think it was someone else pretending. There was no alarmist bias!
:Like Y2K gouging, the Insurance industry into the future will probably get together to use CAGW as a pretext to gouge..
scroll to the bottom of the comments on this earlier thread, where i’ve documented insurance company complicity in CAGW from the earliest days of CRU at UEA, thru to how the reinsurance companies provide a CAGW loophole for insurance companies to increase premiums, and much, much more:
http://wattsupwiththat.com/2012/11/03/why-i-no-longer-subscribe-to-popular-science/
Fortunately they have all those premiums from the hurricane-free years saved up and ready to cover any more that arrive.
Or not.
The reason for this is that their income depends on accurate assessment of the risk and they don’t see an increased risk here. Unlike those funded for finding AGW they cannot see it in looking at what has happened over the last few decades.
James Bull
There is a difference between real risk (which the insurance industry needs to assess accurately) and perceived risk, which the insurance industry may intelligently manipulate to create a profit windfall. Ater all, if everybody agrees that CAGW is a major inflicter of insurable damage the premiums just have to go up, don’t they? And if nothing happens, and the world demonstrably starts to cool, the premiums will creep down to normal levels — until we can be persuaded that we are all about to freeze to death.
One of the more interesting jobs in the world is that of an actuary. When I did work for an insurance company, there were people there who could calculate the probabilities of one of two people dying in any given month of their lives. Becomes a key issue if the individuals involved owned a joint annuity.
And it worked. Get the odds right, you can make money. You lose otherwise. There was even a math function called the ‘first to die’ . Tickled my funny bone when I first heard it, but made a lot of sense.
Does not surprise me at all to hear the insurance industry is not swayed by some of the sentiments out there regarding storm probabilities. They are in this to make money, not to be stylish.
So the insurance insustry say climate change will defenitely happen in the future, but this time it played no role?
Lets trust them!
NPR let that one go by? Where is the outrage by the CAGW faithful?
A great example of the difference between policy based on reality and the needs of the board room as opposed to policy based on ideology and the needs of politicians.
I’ve seen a growing body of evidence that it is people from a commercial background who get hit in the pocket when their own forecasts are wrong who are the most likely to be sceptics.
This year my household insurance premium had a $700 compulsory annual ‘flood levy’ added to it, because of the predicted risks from rising sea levels….in 90 years time. Said insurance company got hit hard by the recent Queensland and NSW floods out here in Oz, so presumably thought they could make up some of their losses.
My property is about 4 metres above the current high tide level. The official Tidal Centre data has sea levels rising at approx. 2mm per annum for the last 50 years in the south-west of Australia where I live. My response was an angry visit to my insurance broker, who said “I’d change insurance companies, if I were you.”
So I did. Local scuttlebutt has it that many of us did the same. Tough, fellas. And serve you damn well right.
Since climates change continually, albeit at a slow rate, I do not see how the claim that it will be a problem in the future. Live with it, adapt.
Weather is driven by heat and it is thought that increasing global temperatures will increase storm severity and frequency. History shows otherwise. So perhaps it is heat difference between areas that drives weather and as the planet warms that difference reduces so reducing the chance of severe storms.
My Insurance Man (a very, very experienced man he is, lectures all over Australia and overseas) tells me that there is no recognised risk in the Australian Insurance Community regarding Climate Change, as there is no actual evidence, only pretend.
Aquix: Climate is a long-term set of averages and expectations and had nothing to do with Sandy except to confirm that mid-to-late fall is still a time of year to expect hurricanes. What caused Sandy was weather: a concatenation of actual current conditions and movements of air currents, water vapor, and other factors that helped bring about a particular incident, or in this case a pair of incidents (hurricane plus cold front). Climate, or even climate change, did not cause that complex of storms. It’s still close enough to late summer in the Atlantic for tropical systems to form, but it’s close enough to winter in the northern part of North American for strong cold fronts to form. The coincidence of their forming and joining is just that–coincidence. Not fun, I know; but not CAGW, either.
Skeptical Lefty above beat me to it and explains it very well. The important thing for the insurers is perceived risk. Recently in The Australian Newspaper there have been a number of people claiming that the pronouncements of the large reinsurance companies are solid evidence of sincere belief in CAGW. Nobody has yet pointed out the obvious fact that such companies can make a nice profit if the perceived risk is talked up whilst the real risk remains unaffected.
When your evidence is made up so is your stories.
Insurance companies are forced to toe the line on CAGW.
In primis, because this justifies much needed rate increases; secondly because – as all other heavily government scrutinized and regulated industries – they just don’t have the DNA to go against any statal body or ideology.
Thirdly and most importantly: activist and advocacy pressure groups such as http://www.climatewise.org.uk/ will name, shame and eventually assist disgruntled shareholders in suing any company who dares to refuse them cash or ignore them.
Oct: Daily Beast: Matthew Zeitlin: How Much Will Sandy Cost? Ask the Insurers
The question Sandy brings up for New Yorkers most immediately—and for the insurance industry over the next several decades—is whether these types of catastrophic events are going to be happening more due to climate change.
Two weeks ago, Munich RE, the German reinsurance giant, released a prescient report. The insurance company argued that the U.S., by virtue of its densely populated coasts and vast territory, is uniquely poised to suffer disproportionately from weather-related events. “Nowhere in the world is the rising number of natural catastrophes more evident than in North America,” the report noted. Since 1980, the U.S. has suffered more than $1 trillion in weather-related damage and just more than $500 billion in insured losses.
Because North America is “exposed to every type of hazardous weather peril—tropical cyclone, thunderstorm, winter storm, tornado, wildfire, drought, and flood,” it will feel the brunt of rising global temperatures. The study argues that “climate change particularly affects formation of heat waves, droughts, intense precipitation events, and in the long run most probably also tropical cyclone intensity.” Translation: more and stronger storms like Irene, Katrina, and Sandy. Storms—hurricanes, tropical cyclones, and thunderstorms—account for 76 perfect of the losses Munich RE calculated for North America in the past 30 years. If climate change is spurring greater and more violent storms, the insurance industry may have to change the way it calculates its exposure to them—and hence what it charges for insurance.
In a release, Peter Röder, the Munich RE board member who oversees their North America operations, said, “We should prepare for the weather risk changes that lie ahead, and nowhere more so than in North America.”
http://www.thedailybeast.com/articles/2012/10/31/how-much-will-sandy-cost-ask-the-insurers.html
29 Oct: SMH: Peter Hannam: Companies cooling on global warming
Munich Re, the world’s biggest re-insurer, told BusinessDay that Australia’s weather-related losses rose more than fourfold in the 1980-2011 period (in inflation-adjusted terms), a pace only exceeded among the continents by North America.
Australia makes up less than 2 per cent of the global reinsurance market but over the past five years the country has accounted for more than 6 per cent of global losses, the risk report said…
Port operators, though, are factoring in increases anyway. The proposal for a fourth coal terminal at the Port of Newcastle, for instance, assumes a rise of 90 centimetres…
“Only 11 per cent of Australian superannuation (retirement funds) surveyed by AODP rated the likelihood of climate change as high,” the report said.
No fund reported investments in assets to help manage climate risks – such as flood barriers – or were considering their portfolio-wide exposure…
In its report, Superannuation Trustees and Climate Change, Baker & McKenzie and AODP found ”a general reluctance by asset managers and fund managers to disclose the climate-associated risks of their investment portfolios”…
The report argued that super trustees could face future litigation if they fail to take appropriate steps to protect the values of their long-lived assets.
”Trustees have a clear duty to consider climate change risks and relevant laws and policies in making investment decisions where such matters prove to be material,” the report said. ”To fail to do so would be negligent and a breach of their duties.”
AODP have been telling trustees of the risks for several years, said Julian Poulter, the project’s executive director…
http://www.smh.com.au/business/carbon-economy/companies-cooling-on-global-warming-20121029-28dn0.html
If the CAGW crowd were smart, and had taken a course or two in thermodynamics, they would notice that hurricanes and other storms can be analyzed as heat engines driven by a large temperature **differences** between the temperatures near the equator and temperatures near the poles. Hurricanes, for example, send all the air spiraling in toward the center high up into the atmosphere. Eventually this air has to travel away from the center and descend back to its original low altitude. As a general rule, the further this air has to travel to find cool regions for its descent, the weaker the hurricane.
The AGW alarmists, having grasped the heat engine model, would then notice that their own climate models predict much more warming at the poles than at the equator — hence less of a temperature difference between pole and equator leading to fewer, weaker hurricanes. They then could point to the rise in average global temperature between, say, the 1960’s and today and connect it to the fewer, weaker hurricanes we have been experiencing over the last few years. Result: more rather than less evidence for their global warming theory. (Of course, none of this has anything to say about how much of the warming is due to entirely natural processes.)
The poison pill for their political movement, of course, is that making this argument implicitly calls into question their unexamined assumption that a moderate amount of global warming would be a bad thing rather than a good thing. As is so often the case, better and more accurate science would be politically inconvenient.
Another general rule is that when both sides of a political argument are indifferent to — or even dislike — what you are saying, the chances better your science is sound.
Skeptical Lefty nailed it! The obvious message for society is to keep the insurance industry as competitive as possible. The companies that understand that the real risk is not to be found by reading RealClimate will be able to undercut those companies that do buy the alarmist line.
I like it. Rather than ask a bunch of government employees who’s careers depend on government grant money to study climate change as to the impact of climate change, see what the industry that would be impacted financially thinks.
Actuaries as a proxy for climate consensus.
Pat/Skeptical/DG/Cal
A thought from within the reinsurance industry from someone who did OK competing against the herd: they are not as clever as you might think.
Just as Bloomberg’s sudden conversion to CAGW is convenient cover for his failure to invest in flood defences, Munich Re, Swiss Re and RMS and others have used climate change as a counterweight to their failure to take into account all relevant factors in revaluing old losses in their models. They have repeatedly underestimated the effects of demographic change and affluence, of changes in coverage bought, of the complexity of infrastructure, and also the severity of old events such as the 1938 hurricane, the two 1954 north east hurricanes and Donna in 1960, so it appears to them that weather-related insurance losses are getting worse and worse.
Their arguments have been demolished by Landsea and Pielke, but as long as the “mainstream” commentators keep getting away with calling these dedicated and knowledgeable researchers “deniers” the insurers won’t need to face facts. People like Hoppe and the CRU gang are true believers with a religious fervour that defies all fact-based counter-arguments, and their views are widely shared in the industry because it absolves management from responsibility for its failure to do its job. It’s so handy: sell wind or crop cover too cheap – global warming has changed the game; over-expose your portfolio on the coast – it’s all the fault of rises in sea level, even if they are only an inch per decade.
(Sadly for Cal, by the time you do the math properly it doesn’t come up much cheaper than the result of underinflation plus spurious climate change fudge factor. Also the demand for cover in the North Eastern US is so great that it outstrips supply, driving prices up. If I have two people competing for my precious capacity, then all other things being equal I will sell it to the person offering the higher price, as this is business, not a charity and even if it were a charity why would the person offering the lower price necessarily deserve my kindness?)
Catlin’s polar adventure was merely a publicity stunt designed to curry favour with cool green trendy people in the mistaken idea that they were opinion formers and would raise Catlin’s corporate profile and hence business volumes and share price.
I have been saying for the best part of two decades that the difference between an insurer and a lab rat is that if you put the rat in a maze and at one point apply an electric shock, next time the rat will find a different way round, but the insurer is not that smart.
In Britain the insurance companies ask for the construction materials of your building and roof shingles. I’m guessing that saying wood or similar would raise premiums significantly.
When the news shows the houses shattered like matchboxes it is very difficult to realise we are viewing the USA and not some third world backwater. Is it cost that causes homes to be built this way, is it really necessary? I understand that most construction methods will not help if the problem is flooding (this is our favourite – building on flood plains and wondering why we get flooded), heck there’s a clue somewhere there.
But if insurance companies get together and announce climate change/increased premiums etc. isn’t this called a cartel (illegal here).
Perhaps if certain construction methods were encouraged/discouraged by premiums then over time the damage may be mitigated. A competitive system as Cal mentioned above @6.07am is obviously best all round.
SteveT