Latest opportunistic moneymaker: ‘climate insurance’

Just how does one differentiate weather claims from climate claims? Will the answer always be the standard maxim: “That’s weather, not climate?”


Insurance for an uncertain climate

In December, negotiators at the Paris climate meeting adopted insurance as an instrument to aid climate adaptation. Earlier in the year, the leaders of the G7 pledged to bring climate insurance to 400 million uninsured individuals in poor countries by 2020. In a new article in the journal Nature Climate Change, experts from the London School of Economics and Political Science, Deltares and International Institute for Applied Systems Analysis welcome these developments, but also lay out the difficulties that policymakers will face in turning the ideas into action. They warn that ill-designed and poorly implemented insurance instruments could fail to reach the goals of negotiators, or worse, prove detrimental to the very people they are intended to protect.

Swenja Surminski, Senior Research Fellow the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science led the article. She says, “Poor communities are much more impacted by extreme weather such as floods, droughts, and heatwaves. Rather than ad-hoc and unpredictable payments after these events, insurance approaches can be set up in advance of these impacts, and be more efficient and provide better support to these vulnerable people.”

Bayer was one of the first to propose insurance as a mechanism to reimburse people for the impacts of climate change, and to examine the potential benefits and trade-offs of such policies. She says, “With the new momentum we have for these policies, we now have the opportunity to put the right insurance systems in place.”

While insurance could provide funding to help people in need, the researchers point out several ways that such mechanisms could fail:

  • Any new insurance scheme in developing countries needs to overcome difficult challenges, including lack of risk data, limited financial literacy, and weak financial infrastructure;
  • Insurance for the poor will only be viable if it is linked to adaptation and risk reduction efforts that reduce the underlying risk factors including climate-resilient infrastructure, adapted agricultural practices, and early warning systems; otherwise climate insurance will be short-lived and far from cost-effective;
  • Traditional insurance is an expensive mechanism with high transaction and capital costs, making premiums far higher than expected losses. This suggests that adaptation funds might be better spent on other types of safety net rather than on buying insurance cover from international insurance markets;
  • Insurance will need high levels of subsidies or other forms of support to render it affordable and to avoid shifting responsibility on to those who are the least responsible for climate change, the least able to shoulder the premiums, and in many cases the least able to reduce their losses.

In order to avoid these problems, the researchers argue, policymakers should consider climate insurance as part of a wider adaptation strategy rather than in isolation or as an alternative to adaptation.

Surminski points to her recent reviews of insurance schemes in developing countries and says, “When installing an insurance scheme, climate change and other factors contributing to the risks need to be taken into account. Insurance needs to be coupled to adaptation efforts to deal with these risk factors, otherwise climate insurance will be not be sustainable nor cost-effective.

Laurens M. Bouwer from Deltares, another coauthor, adds, “What is critical for any adaptation or insurance scheme is that we understand current and future risks from extreme weather sufficiently, in order to make the right decisions. Here, the experience and tools for risk assessment can help.”



Surminski, S., Bouwer, L.M. & Linnerooth-Bayer, J. (2016). How insurance can support climate resilience. Nature Climate Change. April 2016.

50 thoughts on “Latest opportunistic moneymaker: ‘climate insurance’

  1. In December, negotiators at the Paris climate meeting adopted insurance as an instrument to aid climate adaptation.

    That’s good news is theory. Market based insurance is a way to express the price estimate of a risk. I argue the risk is low, so the price should not be high. If it becomes high, surely that tells the risk is real and the insurance is needed.

      • There is no definition of “climate”. Hence, it does not exist.
        Prove me wrong, if you dare.

    • Well those persons who want to buy insurance for themselves against the risk of their Temperature going up due to climate change, should pay a premium (annually) of perhaps 2/288 of the Dollar/Euro/Yen/whatever amount of coverage they want to buy. The two being the presumed damage risk threshold Temperature rise, and the 288 being the current global mean Temperature.


      • George

        As a retired CFO and Berkshire Hathaway stock owner, I assume you that is not how insurance is priced. It;s more a mix of the following:

        (1) Educated (or not) guess of the underlying risk, plus
        (2) Whatever the market will bear

        We’re in the ridiculous situation of #1 being approximately 0, and #2 being a largish number. However, anyone actually selling this product would probably quickly be in political/legal trouble for (among other things) fraud (ostensibly because of inadequate reserves)…

        At this point, someone will, no doubt, point out the price of (almost all) insurance is reprice annually, and, unless specifically excluded, undoubtedly already includes somebody’s “climate risk” guess.

  2. Simples: Weather is an ‘act of God’; climate is an ‘act of Man’. Unless, of course, your insurance company is agnostic, perhaps.

  3. I’d like to see the work done to come up with actuarial tables for climate. I can’t believe an insurance company would actually back this.

    • I can! Insurance companies are in the business of taking money not paying out money in case of loss. Simply take money for risks only associated with man-made climate change. Whenever an extreme event occurs where the media/alarmists uses the words “unprecedented” and “the new normal”, all the insurance company has to do is refer to some weather history to quickly prove the event was not because of AGW. It is real simple: take the money and deny every claim by using weather history to show such event really was not unprecedented and thus not the result of AGW.

      Example: a category 3 hurricane makes landfall in Connecticut. “This is what we can expect in a warming world!” claims the alarmists and parroted by the news media. So the local residents file a claim with the insurance company. “Our claim adjusters have noted that in 1954 Hurricane Carol passed over Long Island and Connecticut as a category 3 hurricane. A few weeks later, Hurricane Edna also affected this area. Your claim is being denied because your area has had category 3 hurricanes in the past showing that such events are not the results of man-made climate change.”

      Sounds like easy money to me.

      • Yes, you have put your finger on the issue. Attribution. It’s really the same sort of thing where someone sues the tobacco company for their lung cancer. Say the rate among smokers is 4x the rate for non-smokers. You have a hundred patients. Which 80 are the lucky winners? Especially since not everyone who smokes gets lung cancer.

    • Insurance companies don’t care a hoot about dangers (or absence of dangers) from climate change. They accept risks from year to year – and simply increase (or decrease) their premiums from year to year according to losses or gains made each year. They laugh all the way to the bank no matter what the weather turns out to be.

      • And note the fourth point made above:

        Insurance will need high levels of subsidies or other forms of support to render it affordable

        Say no more!

  4. “We need to raise our prices for insurance! A lot!”


    “Climate change! It’s going to cost a bunch, eventually!”

    “What if the disasters never come, and the insurance companies never have to pay out more money?”

    “Then you can feel good about knowing that you tried to do something.”

    “Will you pay back the excess charges?”


  5. As usual, Monty Python was there first. Just needs a little re-write:

    Luigi: (Michael Palin) (looking round office casually) You’ve… you’ve got a nice flood plane.

    Colonel: Yes.

    Luigi: We wouldn’t want anything to happen to it.

    Colonel: What?

    Dino: No, what my brother means is it would be a shame if… (he starts chipping away at the dike)

      • “PiperPaul March 24, 2016 at 11:11 am

        ‘Plane’ (as in flat surface) actually makes more sense.

        This is the danger of googlemind on my part. Didn’t check it. Didn’t feel the need to check it. Now I HAVE to check it. BRB.

        Ok, I was wrong before I was right. Flood plain and floodplain are correct. Flood plane makes sense, but we may have to wait for the post-modernist 1984-like shrinking of our vocabulary.

  6. We are being hammered by hurricane damage here in Florida. (not the kind you might think)

    Ten years ago the State gave the insurance companies a hurricane surcharge because we had 3 hurricanes in one year. I think (from memory) only one made landfall but that is not the point. The state gave companies extra money paid for be all insured people for the extra hurricanes coming in this new, warmer era. We have not had one make landfall in Florida since.

    Will they give the money back? Will they at least do away with the surcharge that was not needed? I know, I know — to ask is to answer.

    ~ Mark

    • Well, much like the airlines charging you more for a fuel surcharge when fuel prices go UP, they want you to forget about it when fuel prices go DOWN…and the surcharge is still there.

      When I left home for college in 1985, my parent’s basement contained some old second hand furniture, an old second hand rug, and an old TV. Total replacement cost in case of a flood: about $10.

      My basement contains new furniture, new carpeting, a widescreen TV, a surround sound stereo system, a computer, etc. Total replacement cost: well, lets hope I never find out.

      Seriously, in a throw-away culture where built-in obsolescence means that most of us have at least one fully-functioning but “old” device sitting in a drawer somewhere, who can really put a replacement cost on something?

  7. I guess it was only a matter of time before Climate Scientists re-defined “acts of god”.

  8. Maybe it could be designed like Obamacare. Require everyone to buy it and subsidize the poor. High deductibles and the UN could make a tidy profit

  9. Maybe insurance would be a good solution for those poor, poor folks in Portsmouth NH who were told yesterday:

    People who live in a low-lying area of the city like the South End should consider selling their house — “and I’m not kidding,” said Cameron Wake, University of New Hampshire professor of climatology and glaciology.

    Cameron Wake’s livelihood depends on carbon dioxide being the demon gas he insists it is. He is the director of Climate Solutions New England, and has been spreading his flavor of gloom and doom for over a decade.

    Or maybe a friend is interested in some seacoast property cheap.

    • “Or maybe a friend is interested in some seacoast property cheap.”

      Is his name David “Four Homes” Suzuki, or Al “Lives on the Ocean” Gore?

    • Well if it is that big a risk, then they should condemn those properties, and the government should grant them a tax loss on the previous market value of those properties. And prohibit them being sold to anyone else. Make them public parks, until such time as they get washed into the sea.


  10. “Swenja Surminski, Senior Research Fellow the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science led the article.”

    Political Science – there we have it!

    • Well yes, ‘Political Science’, but you forgot to mention it is an ‘insurance scheme’. Whenever they have a scheme, you need to hold on real tight to your wallet.

  11. insurance company collects the premiums for decades before any substantial payouts are required by which time:

    – the financial assets have been stripped leaving little or nothing to pay claims
    – the new climate is redefined as weather meaning no payout is due.

    What a good business model!!

  12. A gift the keeps on giving … and apparently will continue.

    (1) New Orleans is in a tidal delta and swamp, below sea level, in a well known tropical Hurricane belt. So what really caused that event? Yup, that was in fact anthropogenic in origins.

    (2) The US population buy sand plots upon barrier island tidal dunes that disintegrate in storms then blame “climate-change”, for entirely predictable results of astonishingly foolish ill-educated actions on their part. So that one’s anthropogenic as well.

    (3) Manhattan and Jersey Shore are ocean-front coastal tide areas. Putting buildings on it does not change that fact one scrap. So this Cat-1 alleged ‘catastrophe’ was thoroughly anthropogenic too.

    But the “climate” did not change in a detectable way, as all three events were lower than the known strongest background of natural weather events to take place in these same areas. So this was just normal predictable weather variability.

    The only difference being that real estate con-merchants were permitted to sell swamps and beach dunes for housing, and governments approved building cities in such places, despite the known effects of weather. And insurers agreed to even insure them, as they would make a fortune in the short to medium-term. And the public were fools enough to think con-men and governments could suspend physical reality which could be safely ignored and would not matter any more.

    And when physical reality did turned up, and did do the entirely predictable (and thoroughly predicted) everyone then ignorantly screamed, “Look! It’s extreme weather! It must be climate-change! We must have made the weather go wonky!”

    But despite the initial con-job of selling the swamps to house fools in flimsy constructions, and the on-going error of buying and building there still … well, just where did they re-build again?

    Ah! … on the very same sites of the prior natural scale events, of (1), (2) and (3).

    Climate-change’s alleged ‘extremes’ apparently means no-change.

    Why didn’t they change locations, if they really believed the climate actually changed? … eh? … please explain that to me?

    Why didn’t all levels of government, who are convinced of climate change has occurred, and caused this, and therefore will also cause more and worse than this soon-ish, use due diligence to legally refuse permits to rebuild in the same vulnerable areas? If governments really believe the hype, which it cites to give away domestic taxation revenue to formal, entrenched and also newly-proposed UN ‘climate-change’ scam’s, gravy-trains and quangos — why then, did they do nothing about where people rebuilt?

    For either they don’t believe their own government hype and policy statements or they’re knowingly negligent and liable for the next events which can and certainly will occur in these very same locations.

    The fact that politics hypes the danger all the more after the events, but then did nothing at all about the very same rebuilding mistakes being immediately repeated, and also that these were not even unknown scales of events, but were in fact more-or-less typical of what would normally be expected to occur from time to time, and also kicked the beloved high-brow “precautionary-principle” under the nearest carpet, is the honest to goodness real-world rubber on road test and reality-check to this whole “climate-change” circle-jerk and all of its disingenuous fear-campaigns and excuse making, by the same con-men … who have now moved on to politics, after selling the swamps and sandbars to fools.

    Weather is doing nothing unexpected, except that perhaps our records show that it’s become less extreme than it has been for most of human living memory.

    The real problem here in not even weather or climate, it is that fools were tricked into buying swamps and sand bars and that local and state governments and city planners allowed cities to be built on these … and are STILL doing it!

    There’s your extreme event, it isn’t weather and has nothing to do with climate, its just the effect of millions of fools being exploited by venal misanthropes who made squillions via bilking these consummate chumps, again … and again.

    And even when it all gets wrecked, all blows up in a huge entirely predictable mess, these people who bough there are still vapid and insipid enough to fall for cynical irrational lines like, “Climate change did this, so now we must raise tax on you some more, for you are to blame for it, for you are a human, and your taxes must now fund UN quangos and subsidize solar ‘industry’ failure, so we can ‘fix it’ all, so it’s all better again”.

    Our subjection to physics and natural-selection does not stop.

    • Well blame that NO idiocy on the French. Then the USACOE built a big wall around it to turn it into a swimming pool; and the deeper they make the pool, the more water it will hold when the hurricane goes right over the wall.
      Do hurricanes get as high as 45,000 feet ? That’s a bit too high to build a wall.; well it’s also too deep for a swimming pool.


  13. Climate insurance is not really new. I believe that ‘catastrophe insurance’ been available since before 2009 from Catlin Insurance which funded the 2009 Catlin expedition. Anyone remember the near-comic misadventures of Pen Hadow and his team?

    I believe that the climate vociferous Richard Branson’s Virgin conglomerate also tried selling a similar product, and my top hit when Googling ‘Climate insurance’ flagged up a whole raft of Insurance related companies and think tanks. Not least of whom is the German based Munich Climate Insurance Initiative, which has been going since 2005.

  14. Warren Buffet must be rubbing his hands together in eager anticipation of insurance premiums ,i.e. “float” in writing annual climate change policies

  15. I continue to wait for the day when Al Gore calls a press conference, details how much money he has collected with his climate screeching, laughs maniacally and shouts: Suckers!!!

    There’s a lot of money flooding in to this crap; Gore has skimmed his pile off the top.

  16. the insurance industry’s insurer Lloyds!

    23 Mar: Lloyd’s: Lloyd’s Reports £2.1bn profit for 2015
    Lloyd’s Chief Executive, Inga Beale, said:
    “Lloyd’s is pursuing its strategy to deliver risk solutions to a fast moving world, business looks to the Lloyd’s market to underwrite policies too complex for others to handle. Protection from cyber-attacks, terrorism and ***climate change are needed now more than ever.”

    23 Mar: Sky News: Lloyd’s Warns On Terror As Profits Dive 30%
    The specialist insurance market’s chief executive says protection from terrorism is needed “now more than ever”.
    Lloyd’s pointed to a “fast-moving world”, with other threats including ***climate change and cyber crime, in its annual report released just 24-hours after the bomb attacks in Brussels…
    Chief executive Inga Beale said: “Looking across the financial sector, we live in the age of disruptive innovation…
    “Business looks to the Lloyd’s market to underwrite policies too complex for others to handle. Protection from cyber-attacks, terrorism and ***climate change are needed now more than ever.”
    She expected market conditions to remain challenging, “providing a climate of reduced levels of returns”.

    basically, zero & negative interest rates lowered Lloyds return on investment last year, so they are looking for a new revenue stream. public beware.

  17. should have included this link.

    if I understand the full 5min29sec interview, they appear to be talking about a 9% return on investment compared to 14 or 15% last year, poor things. also, Inga doesn’t name “climate change” but rather talks of MANMADE risks:

    VIDEO: 23 Mar: Bloomberg: Pricing Risks Amid EU Terror and Possible ‘Brexit’
    Inga Beale, chief executive officer at Lloyd’s of London, discusses what the attacks in Brussels means for the company and pricing policies amid MANMADE risks. She speaks with Guy Johnson on Bloomberg Television’s “On The Move”.

  18. “Bayer was one of the first to propose insurance as a mechanism to reimburse people for the impacts of climate change, and to examine the potential benefits and trade-offs of such policies.”

    Any company that didn’t want to pay a claim, because it was large, for example, could demand that the claimants prove the storm was caused by human CO2 emissions. In rebutting any claim all they have to do is show that on balance no storm has even been shown to have been ‘worse’ because of ‘global warming’, or even less, AGW. A hundred imagined or real damages will be unclaimable based on lack of evidence with a hundred excuses available – pick one without risk.

    It’s money for nothing and your picks for free.

  19. And when a claim comes in for damage because of “climate change” they have the “act of god” ruse, only this time it will be: “it’s not climate change, it’s weather, go away”.

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