Insurance companies not seeing effects from posited 'climate change' spawned weather disasters

Lack of major disasters gets Lloyd’s of London back in profit –

disastercollage

WUWT reader “jimbo” writes in Tips and Notes: We often hear how climate disasters / extreme weather events are getting worse. We know there is no evidence and sometimes the opposite is seen. Now let’s look at the insurance industry. Surely they could tell us that things are indeed getting worse than we thought!

Surely Warren Buffett has an eye for increasing premiums in the face of extreme weather events?

CNBC – 3 March 2014

No climate change impact on insurance biz: Buffett

The effects of climate change, “if any,” have not affected the insurance market, billionaire Warren Buffett told CNBC on Monday—adding he’s not calculating the probabilities of catastrophes any differently.

While the question of climate change “deserves lots of attention,” Buffett said in a “Squawk Box” interview, “It has no effect … [on] the prices we’re charging this year versus five years ago. And I don’t think it’ll have an effect on what we’re charging three years or five years from now.” He added, “That may change ten years from now.”………

Buffett’s Berkshire Hathaway owns several insurance and reinsurance interests—including Geico and General Reinsurance—and often has to pay significant claims when natural disasters strike.

http://www.cnbc.com/id/101460458

What about Lloyd’s of London?

Reuters – 25 September 2014

….But Lloyd’s combined ratio, a measure of profitability showing how much insurance premium is paid out in claims and expenses, deteriorated to 88.2 percent from 86.9 percent. A ratio below 100 percent indicates an underwriting profit. “It’s been a fairly benign period for major catastrophes,” Parry said.

Insurance underwriters tend to perform less well in the absence of major catastrophes, as insurance premiums fall…..

http://uk.reuters.com/article/2014/09/25/uk-lloydsoflondon-results-idUKKCN0HK0ML20140925

See also:

Lack of major disasters gets Lloyd’s of London back in profit

http://www.thisismoney.co.uk/money/markets/article-2209103/Lack-major-disasters-gets-Lloyds-London-profit.html

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57 thoughts on “Insurance companies not seeing effects from posited 'climate change' spawned weather disasters

  1. SO having pocketed all the premiums driven by the scare they are not seeing the expected claims and subsequent payouts.
    I bet the insurance companies are disappointed…

    • You know, a cynical person might point out just how profitable it was to play up the idea of a scare, thus jacking up rates, while you knew very well that their would be no increase in payments.
      Yes, a cynical person might also point out how many, how almost all of the people who have profited massively from building up the scare just happen to be so closely affiliated to the political party who did everything it could to fan the flames of the scare.
      He might even go so far as to point out just how much of the money that was gained in that way was kicked back to that party as “contributions”.
      But you would have to be very, very, suspicious and cynical to think there was anything to that. It’s all just one big series of coincidences. Isn’t it???

    • And this inconvenient truth is the problem for them. Aside from peer reviewed papers I thought there has to be some other global metric. The 2 insurance firms are pretty large and do quite a bit of re-insurance.
      Just as with claims about spiral global ice melt we then take a look at the rate of sea level rise. The evidence I have found from the peer review is DECELERATION in the face of ‘thermal expansion’ and the death of ice. You have to ask yourself WUWT?

      Abstract – January 2014
      Global sea level trend during 1993–2012
      [Highlights
      GMSL started decelerated rising since 2004 with rising rate 1.8 ± 0.9 mm/yr in 2012.
      Deceleration is due to slowdown of ocean thermal expansion during last decade.
      • Recent ENSO events introduce large uncertainty of long-term trend estimation.]
      … It is found that the GMSL rises with the rate of 3.2 ± 0.4 mm/yr during 1993–2003 and started decelerating since 2004 to a rate of 1.8 ± 0.9 mm/yr in 2012. This deceleration is mainly due to the slowdown of ocean thermal expansion in the Pacific during the last decade, as a part of the Pacific decadal-scale variability, while the land-ice melting is accelerating the rise of the global ocean mass-equivalent sea level….
      http://www.sciencedirect.com/science/article/pii/S0921818113002397
      ==================
      Abstract – 23 February 2011
      Sea-level acceleration based on US tide gauges and extensions of previous global-gauge analyses
      It is essential that investigations continue to address why this worldwide-temperature increase has not produced acceleration of global sea level over the past 100 years, and indeed why global sea level has possibly decelerated for at least the last 80 years.
      http://www.jcronline.org/doi/abs/10.2112/JCOASTRES-D-10-00157.1
      ==================
      Abstract – July 2013
      Twentieth-Century Global-Mean Sea Level Rise: Is the Whole Greater than the Sum of the Parts?
      ………..The reconstructions account for the observation that the rate of GMSLR was not much larger during the last 50 years than during the twentieth century as a whole, despite the increasing anthropogenic forcing. Semiempirical methods for projecting GMSLR depend on the existence of a relationship between global climate change and the rate of GMSLR, but the implication of the authors’ closure of the budget is that such a relationship is weak or absent during the twentieth century.
      American Meteorological Society – Volume 26, Issue 13
      http://dx.doi.org/10.1175/JCLI-D-12-00319.1

  2. And from Florida-
    http://www.miamiherald.com/news/politics-government/article1989462.html
    September 5, 2014-
    “The Florida Office of Insurance Regulation on Friday said the average Citizens’ homeowners rate will fall by 3.7 percent, slightly more than the 3.4 percent cut Citizens had originally sought in June. Rates will fall 4.6 percent, on average, for mobile home owners with multi-peril coverage.”
    “In making its filing, Citizens cited several triggers for lowering premiums:
    1. Florida insurers haven’t had to pay hefty hurricane claims since recovering from the storms of 2004-2005.

    3. The insurer is paying much less this year for reinsurance, an added layer of coverage that insurers buy to help pay catastrophe claims.”

    • My Citizens insurance went up this year. Not a whole lot but it went up. Keep in mind that in the 12 years I have lived in this house I have paid a total of about $12,000 in premiums. My house is insured against wind damage for $170,000. Not a bad trade off.

  3. The statement Insurance underwriters tend to perform less well in the absence of major catastrophes, as insurance premiums fall….. is a surprise at first. Perhaps the explanation is that major catastrophes are marketing tools, causing more people to buy insurance. Thus even though pay-outs increase, the incoming money increases even faster.
    So… if the insurance industry could invent an entirely fictitious major catastrophe, and convince everyone that it was already happening, then they could increase the incoming money without increasing pay-outs. Which would doubly improve their profits.
    Hmmm…

    • Speaking as an insurance industry insider, I hope I can explain without being too dull that the increased profit following a major loss event is all in the “payback” increased rate for the next and subsequent years’ coverage. With excess loss reinsurance generally the insurer pays the reinsurer an additional premium in the same coverage year as the loss as well as an increased rate in subsequent year(s). The reinsurer has further reinsurance for their own account which will be cheaper than the reinsurance they provide, so they “arbitrage” on the additional premium they receive versus what they pay. So perversely when the losses are quiet, premium rates fall but expense rates are constant so profitability drops.
      Apologies if I sent anybody to sleep.

      • No apology needed. Your comment points out that financial systems behave like the climate system, adjusting to disturbances and distributing the flow throughout the various parts as equilibrium is restored.

      • I have 40 years experience in the insurance and reinsurance world (including design of cat models) and I can confirm what Admad said. Sorry, no exciting conspiracy. There is constant pressure for reduction in rates (which may come as a surprise to those of you paying for your insurance.) When the wind doesn’t blow, the insurers succeed in getting reductions in rates for reinsurance, which they may or may not pass along to customers. Then the winds blow, the reinsurers pay out, and they get the spine to insist on increased rates, which may stay high enough long enough to cover their losses and more. Of course, when the alarmists are preaching Armageddon, the reinsurers might not literally lie, but they are only too happy to point to those predictions when sitting in negotiation. The prices paid for coverage are partly pure numbers, but a big dose of negotiation skill, and the warmists have been good for the reinsurers.

      • Insurance is a zero sum game. At least in theory (there is the vigorish to remember). However, through actuarials, you estimate how many people are going to buy, then through (hopefully) science, how much you will be obligated to pay. You then match the numbers by applying weighting factors (rates), with a little extra on your side of the ledger for expenses and a ROI. And all is good with the world.
        Then a monkey wrench is thrown in. Due to creating hysteria based upon false information (not the insurance companies, the government), a LOT more people buy the product than was originally projected. Which means there is a LOT more revenue coming in, which far exceeds the expenditures. And it is pure profit. That is what is happening.
        What you are describing is NORMAL operations. Where the revenue an insurance company gets AFTER an event is used to pay for the preceding event (why your insurance rates go up after an accident). But there has been no accident. The rates were set based upon X number of people buying your product for Y events causing Z dollars of damage. But X+millions bought instead. So it does not matter about Y and Z as revenues are already up.

  4. As long as we are not compelled to buy insurance, for example I have no renters insurance, a lack of disasters will lead to reduced premiums or no premiums as all as more and more people delay buying, shop for a better deal, or just say no thanks.

    • Insurance is protecting against a risk. So, I want some protection, and I buy insurance. When the disaster happens I will be covered.
      You opt not to buy insurance for the unknown, please do not expect me to donate to cover your stupidity. And don’t be surprised if I object to the government covering your losses.

      • You seem young. Back in the day, insurance was a quick aim. But accidents and acts of nature were something you just lived with. There was no paper insurance of any kind. And it seems, we survived all right.

      • Liz,
        Ms Gray has every right to assess her own life and decide is the risk is something from which she can afford to recover on her own if she loses the bet she makes. That’s called liberty. And from my previous posts here, people are probably starting to see that I’m all for that choice, and for people bearing the consequences (and us helping our less fortunate neighbors of our own volition, or not).
        The issue to which you are objecting is that some (or possibly many) are not really making a bet and intending to live with the resultant consequences. Instead they are gaming the system of government handouts. As you suggested, you should object strenuously to the government (especially the feds) bailing people out. This is not a job of the federal government, whether it’s business (ENRON, GM, etc.), banks (US BANK, etc), mortgage holders, mortgage lenders (Fannie and Freddie) or insurance companies (AIG).
        I suggest saving your vitriol for a government intent on buying votes with their handouts, and not individuals who make the best choice with their own lives based on things they know well and no one else does.
        Bottom line: Lets not confuse liberty with a broken government and leap to the conclusion that taking away liberty is the way to fix the problem. It’s not. Taking away liberty just makes it worse–ALWAYS.
        Bruce

    • When looking at insurance as a proxy it’s better to get as wide a coverage as possible. Loyds and Munich re for example.

  5. The local meteorologist that writes for the StarTribune here in Minneapolis, North Korea, on occasion uses the insurance industry as “proof” of global warming. He’ll say, “they believe in it so it’s true.” Doesn’t cross his mind that they insure disasters, so anytime you can convince the gullible public that there might be more of them, well, you know..

    • Exactly, it’s a win win for insurance companies. They cite global warming, increase premiums, then if disasters are below expectations, then it is booming profits. If disasters do occur in unexpected excess (not due to global warming but because poop happens) well they have the additional premiums to to more easily address them.
      Global warming is all goodness for insurance companies.

  6. O.K. The disasters are not happening (not any more than expected from a historical perspective). We already knew that. But the quotes:

    Insurance underwriters tend to perform less well in the absence of major catastrophes, as insurance premiums fall…..

    and

    Lack of major disasters gets Lloyd’s of London back in profit

    seem mutually contradictory. Am I missing something?

  7. Insurance companies always like to push liabilities off on third parties, so I would expect them to claim there is Climate Change in the hope that if there was in fact any Climate Change, they could tap into mitigation efforts to offset their costs.

  8. Things haven’t been going too well for the Global Warming folks. First, there has been essentially no change in global mean temperature for 14 – 17 years (depending on which of 4 measures you use). So Global Warming was rebranded as Climate Change. Then, we’ve been told that climate change would lead to more and more ‘extreme weather events’ (translation hurricanes, tornadoes etc. etc.) So after one of the coolest New England summers within memory and with nearly 4 of the 6 month hurricane season gone, we have had a very quiet, not to say comatose, hurricane season.

  9. The Australian Senate Inquiry set up Australian Greens leader Christine Milne into Extreme Weather:
    http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Environment_and_Communications/Completed_inquiries/2010-13/extremeweather/report/~/media/wopapub/senate/committee/ec_ctte/completed_inquiries/2010-13/extreme_weather/report/report.ashx
    An exercise in extreme waste of public funds?
    “The inquiry found the frequency and intensity of extreme weather events will increase in coming decades, costing Australia billions of dollars. . The report is backed up by the release of today’s American Meteorological Society’s snapshot of the world’s climate, which shows disastrous weather events like Hurricane Sandy in the US and droughts and floods in Australia, Africa and South America are the new normal.” Senator Christine Milne.
    Just one question for Christine:
    If global temperature has not increased for 17 years or so, is this also the norm? And why are extreme events increasing recently if temperature is not?

    • There never was a “Hurricane Sandy” that made landfall. Just a tropical storm during high tide. It seems that those who fail to prepare quickly blame something else. In NYC there’s a mayor who’s worried about Big Gulps and Trans-fats. He’s shown no such concern for floodwater mitigation.

      • michael it’s a timing issue. If there’s a low disaster year, it generates short term profits, but that puts pressure on reducing rates. So reinsurers are usually happy when no disasters hit, but after a few years in a row, rates gets so low that some secretly hope for a major event, ideally one that hits competitors mostly.

      • Mostly right. There was a Hurricane Sandy, but in the Caribbean. It regained hurricane strength over water, but was below hurricane strength when it hit the US, so it is correct to say there was no US landfall of Hurricane Sandy, but there was landfall of Hurricane Sandy.
        (ignore misplaced response above this)

  10. Or alternate headline; Insurance companies profiting from increased premiums for weather related insurance and reduced risks(to them).
    The CAGW scheme has a silver lining for many.

  11. The Sage of Omaha:
    “I think the public has the impression that, because there’s been so much talk about climate, that events of the last 10 years from an insurance standpoint in climate are unusual. The answer is they haven’t. You read about these events, but you were reading about events 30 or 40 or 50 years ago.”
    “We’ve been remarkably free of hurricanes in the United States in the last five years. So if you were writing hurricane insurance, it’s been all profit.”
    http://www.weather.com/news/science/environment/what-does-warren-buffett-really-think-about-climate-change-20140303

  12. Things not happening is just what we should expect from climate disruption. You people just don’t get it. Climate change is responsible for all. storms no storms it’s all AGW. There is nothing human caused CO2 can’t do. It’s the bogey man universal. This article should every bit as alarming as its opposite.

  13. All these insurance are for adverse weather. There is no insurance for climate change. Have you ever heard of insurance against temperature rise of 2 C? How about insurance against sea rise of 1 foot? Real disasters are insurable. Imaginary disasters are not.

  14. http://www.nytimes.com/2007/08/26/magazine/26neworleans-t.html?pagewanted=all&_r=0
    There’s an interesting Michael Lewis piece about the insurance industry and its number crunchers, called “In Nature’s Casino”, written for the NY Times several years ago. Karen Clark first predicted / modeled a big storm that would need insurance coverage in the double-digit billions. The insurance modellers scoffed, as per most of the Lewis “little-guys vs. the big-guys” themes.
    In 1992, as Hurricane Andrew was spinning towards Florida, Lloyds released preliminary damage assessments of no more than 6 billion. Clark phoned in her predictions of 13 B in anticipation of weak building codes and costly commercial developments in the storm’s path. The true cost of Andrew was closer to 15 B, the most costly at that time. Of course, with a little modeller’s luck, each successive hurricane will be “the most costly storm” in history.
    And that raises interesting questions about the modellers and the catastrophists of agw, namely, who is happier about bad news when it hits? Both insurers and climate modellers are supposedly assiduous students of historical weather; both are gambling based on past events and fist-pumping the disasters that they are able to predict. Both making their reputations and profits in the process.

    • Joe Public
      In 1994 I destroyed the odious Jeremy Legget in a debate on global warming at the Geological Society. This was the greatest Pyrrhic victory of my life: as a result of that debate Greenpeace decided to not debate global warming ever again but to make assertions instead.
      However, the reason I now write is because Legget then asserted that global warming was to be feared because the re-insurer Munich Re was warning about it. I replied to that by saying,

      “Some insurance companies are arguing for higher premiums in case the worst effects of global warming occur. They call this ‘the Precautionary Principle’. There are ladies present so I cannot tell you what I call it.”

      Everybody understood my point and Legget chose not to reply to it.
      Two decades have passed and only now is my blatantly obvious point gaining traction.
      Richard

    • Are you implying that he doesn’t know how the insurance business works, but farmers do?

  15. Insurance underwriters tend to perform less well in the absence of major catastrophes, as insurance premiums fall…..
    Or maybe the lower performance is due to higher power bills and other increased expenses leaving less money for … luxuries. After all, if a person can afford the premiums, he won’t buy insurance, right?

  16. At the UN in New York, French president Francois Hollande insistently claimed, even passionately claimed that global warming has driven millions of persons from their previously stable lives, making them more receptive to Islamic, or Crony Islamic terrorism. Hollande traced a direct link between global warming (now called “climate change”) and terrorism.

  17. The lack of disasters will drive down premiums. In a year or two there will be a natural disaster – maybe weather related. This will lead to losses and the claims of a worsening situation. By then the premiums will go up and (barring another major disaster quickly after) so will profits. And so the cycle at Lloyds repeats, as it has done for over 300 years.

  18. My husband is an independent insurance adjuster in the US. He has not had much work this year. Lots of adjusters are having to get out of the business so they can have some type of income. Contrary to popular opinion insurance adjusters many times make their money based on the size of the payout of the claim. So, a the more money they can get for the insured without violating the boundaries of their insurance policy the more money the adjuster can make. The claims adjuster is usually on policy holders side. Of course there are some bad apples out there. Knowing that Buffett is making a ton of money off hurricane premiums will make be feel much better when my husband works claims from the next hurricane and finds tens of thousands of dollars in damages that have to be covered by the insurance companies. But for now, I know a bunch of adjusters who would love for a little bit of climate mayhem (of course we don’t want people to be hurt) so they can go to work but we all know it is a cyclical business and try to plan finances accordingly.

  19. Insurance actuaries know full well that the number of catastrophic losses has not been increasing, because the statistics are clear. What has been increasing is the average loss per incident, simply because there are more structures/objects/lives in the path of a typical catastrophe. Hyping climate change is one way you could mitigate the typical insurance cycle (ie disaster strikes, premiums rise….no disaster, premiums fall then losses follow wit hthe next disaster. Rinse, repeat) as a reinsurer by inflating premiums over the entire period. To be truly effective it would need the bigger players in the industry to all hold a similar view….
    Whether you will see this in print from an insurer will depend on what their angle is. Having met with the Lloyd’s risk people I know that their view for many years has been that climate change is a significant risk, and their publications reflect that belief.
    Note that Lloyd’s is not an insurer, but an insurance market (ie the Lloyd’s market brings other insurers together in syndicates to insure large/unusual risks).

  20. Not sure who to believe…
    Undated article from Swiss Re:

    Spiegel said that weather-related losses were rising. “They amount to 40 billion USD at the moment,” he said. “Weather-related insured losses are rising and the intensity of weather-related events such as hurricanes is going up as well. We are integrating these risks in our pricing.”

    http://www.swissre.com/rethinking/insurers_and_climate.html

    • There is no data showing weather / climate becoming more extreme. As for hurricanes they are making up stories. Where is the data to back up their claims?

  21. Very interesting, good news as I fired Intact insurance agency for climate alarmism.
    (They softened a bit in later communications - saying the industry had large losses, but were also whining about earthquake risk – hey! the risk of earthquakes on the west coast of North America has not changed significantly. (Slowly rising in areas that have not had a big one in centuries.)
    Problem is that insurers, re-insurers and pools or whatever Lloyds is get complacent, they lower rates to get more business but the nature of insurance is they have to be able to cover large disasters like Super Storm Sandy.
    Intact was so dumb as to offer out-of-Canada travel insurance for a low price with no restrictions on duration of trip. Just the thing snowbirds want – some stay the winter in AZ. Intact must have lost its shirt because they raised the price every year to roughly four times the original price.

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