Climate Rent Seekers Target Your Insurance Premiums

Guest essay by Eric Worrall

If you thought the job of insurance companies is to charge customers a competitive fee to cover insured risk, you’re sadly mistaken. According to regulators and influential green groups, insurance companies should be investing more of your insurance premiums into their green business ideas.

Insurers Will Be Hard-Hit By Climate Change But They’re Not Investing In The Low-Carbon Economy


MAY 31, 2018 @ 10:00 AM

The insurance sector is on the front line of the battle against climate change – it is having to pay out more to policyholders as extreme weather events such as flooding, droughts, storms and heatwaves become more frequent and more severe.

At the same time, as some of the biggest investors in the world, insurance companies also face significant losses as climate change hits the companies they invest in. “Climate change poses risks for insurance companies, so do responses to it by markets, businesses, consumers and governments,” says Dave Jones, California’s Insurance Commissioner, in a new report by the Asset Owners Disclosure Project (AODP), which sees itself as the world’s benchmark of climate leadership in the investment system.

The impacts of climate-related risks are a growing reality for the insurance sector. This reality has key implications for that sector’s valuation,” the report adds. “Weather-related financial losses, regulatory and technological changes, liability risks, and health impacts related to climate change have implications for the business operations, underwriting, and financial reserving of insurance companies.”

And yet the sector is not aligning itself with the emissions reduction targets set out by the Paris Agreement, to limit average temperature rises to “well below 2°C”, according to AODP’s report, Got it Covered? Insurance in a Changing Climate.

Read more:

The suggestion that insurance companies are at risk because of climate change is false. But don’t take my word for it, the following is an explanation for why climate poses no risk to insurance companies provided by Warren Buffett.

… I am writing this section because we have a proxy proposal regarding climate change to consider at this year’s annual meeting. The sponsor would like us to provide a report on the dangers that this change might present to our insurance operation and explain how we are responding to these threats.

It seems highly likely to me that climate change poses a major problem for the planet. I say “highly likely” rather than “certain” because I have no scientific aptitude and remember well the dire predictions of most “experts” about Y2K. It would be foolish, however, for me or anyone to demand 100% proof of huge forthcoming damage to the world if that outcome seemed at all possible and if prompt action had even a small chance of thwarting the danger.

This issue bears a similarity to Pascal’s Wager on the Existence of God. Pascal, it may be recalled, argued that if there were only a tiny probability that God truly existed, it made sense to behave as if He did because the rewards could be infinite whereas the lack of belief risked eternal misery.

Likewise, if there is only a 1% chance the planet is heading toward a truly major disaster and delay means passing a point of no return, inaction now is foolhardy. Call this Noah’s Law: If an ark may be essential for survival, begin building it today, no matter how cloudless the skies appear.

It’s understandable that the sponsor of the proxy proposal believes Berkshire is especially threatened by climate change because we are a huge insurer, covering all sorts of risks. The sponsor may worry that property losses will skyrocket because of weather changes. And such worries might, in fact, be warranted if we wrote ten- or twenty-year policies at fixed prices. But insurance policies are customarily written for one year and repriced annually to reflect changing exposures. Increased possibilities of loss translate promptly into increased premiums.

Think back to 1951 when I first became enthused about GEICO. The company’s average loss-per-policy was then about $30 annually. Imagine your reaction if I had predicted then that in 2015 the loss costs would increase to about $1,000 per policy. Wouldn’t such skyrocketing losses prove disastrous, you might ask? Well, no.

Over the years, inflation has caused a huge increase in the cost of repairing both the cars and the humans involved in accidents. But these increased costs have been promptly matched by increased premiums. So, paradoxically, the upward march in loss costs has made insurance companies far more valuable. If costs had remained unchanged, Berkshire would now own an auto insurer doing $600 million of business annually rather than one doing $23 billion.

Up to now, climate change has not produced more frequent nor more costly hurricanes nor other weather- related events covered by insurance. As a consequence, U.S. super-cat rates have fallen steadily in recent years, which is why we have backed away from that business. If super-cats become costlier and more frequent, the likely – though far from certain – effect on Berkshire’s insurance business would be to make it larger and more profitable.

As a citizen, you may understandably find climate change keeping you up nights. As a homeowner in a low-lying area, you may wish to consider moving. But when you are thinking only as a shareholder of a major insurer, climate change should not be on your list of worries.

Read more:

Could Warren’s explanation be simpler? He is not rejecting the possibility that climate change will cause more weather related disasters in the future, what he is saying is increased risk would drive greater demand for his insurance products – people would be willing to pay the higher premiums required to cover the increased risk.

If climate change causes more weather disasters, Warren Buffet’s insurance business profits will increase.

Greens were furious with Warren’s climate heresy, in my opinion because Warren Buffett’s dismissal of their false climate insurance narrative undermines their efforts to get their hands on more of your money.

But Buffett’s skepticism hasn’t stopped greens from advancing their plans. My prediction, California at least is building towards forcing financial institutions to invest part of your money into green businesses.

The least worst outcome of such coercion would be a green surcharge on all insurance premiums, as greens do to insurance premiums what they have already done to retail electricity prices in Europe and other places.

The worst case, if a substantial sum of money coercively invested in all these wonderful green ideas evaporates like a bad subprime mortgage, might be a new global financial crisis.

75 thoughts on “Climate Rent Seekers Target Your Insurance Premiums

  1. Well, the do-gooders did try to fix housing inequality, and instituted policies that caused mortgage standards to be relaxed, which led to the dubious loans being bundled into mortgage backed securities, which were somehow more reliable than the “liar loans” that underlay the bonds.
    I am totally sure that the greens will somehow get it right this time on reforming the insurance industry on climate risks. Given the record of do-gooders, what could possibly go wrong?

  2. For years “climate change” has been an excuse to add to premiums. There is no actual increased risk, so the entire extra premium goes straight in to their pockets as pure profit. 100% extra cream – no wonder they love perpetuating the big lie. They rake in billions if not trillions extra profit for taking no extra actual risk. It is as big a scam as carbon taxes to “combat climate change”-nothing but a plundering tax on air.

    • This only works in a world with no competition.
      Since insurance companies compete on price, the first company that cuts it’s rates to reflect actual risk will soon own the market.

      • Hi MarkW. Good comment, for sure. But I just wanted to try out the up-vote feature. Love the new comment format. Good job Anthony and team. And yes I realize this is a week old. I have a day job. Catching up is challenging.

  3. The con artists want to enhance insurance company profits so they can skim it to fund crony socialist ‘green-is-the-new-red’ scams. See it for what it is….

  4. Nature
    Trends in flood losses in Europe over the past 150 years

    “…there has been an increase in annually inundated area and number of persons affected since 1870, contrasted by a substantial decrease in flood fatalities. For more recent decades we also found a considerable decline in financial losses per year….”

    • In Europe, disasters have (mostly) become annoyances and no longer a disaster.
      A few of the reasons for that;
      + the invention of the radio.
      + the invention of the combustion engine.

      Now, people can evacuate and supplies can be brought in at a speed of 1000+ km a day.

    • Construction codes keep being more stringent as time goes. Permits will be required everywhere, and denied if at risk of flooding. Meanwhile, rivers inundating cities were managed with dam and reservoirs etc.
      as usual: the best way to deal with those events is NOT to get as poor and “renewable” as possible in a vain attempt at preventing their happening, it is to get as rich and mechanized as possible to build strong and to repair quickly.

  5. Considering just large losses in the US last year, loss due to severe weather events was more than $300 Billion.

    For how many years will the insurance industry be able to meet claims?

  6. Rent-seeking. Funny how often “reforms” fill the pockets of the Progressives.

    PS: Hey, comments are now editable for a few minutes after posting. Hoorah!

  7. The intellectual problem for the watermelons is multi-fold.

    – Most of them have no appreciation of the time-value of money. That much is clear from the Social Cost of Carbon farcical analysis done under the Obama Admin.
    Willis reviews that joke from the Obama Admin here:

    – Most of them think they are deep thinkers. But Nassim Taleb has a better name for them, “IYI, intellectual yet idiot”. Clearly Warren Buffett lives in the real world, and sees the world of insurance risk clearly. Yet he has to fight back against the IYI’s who want to tell his Berkshire-Hathaway how to price risk.

    – The IYI’s need companies like B-H and Big Oil to buy into the virtue signalling of climate change by claiming they are pricing in events like Super-Cats in 2068, or that future political restrictions on extracting proven oil reserves will be left in the ground and must therefore hit company valuation today and by extension stock holders. Yet, all these attempts by Green Hedge Funds to bring this to share holder voting all fail for multiple reasons. Every historical precedent is that if its a proven reserve, there is a price point that will come where it will be extracted.

    – Time is not on the watermelons side. The relentless march of the calendar brings the day of reckoning with natural cooling, a robust return to the Hiatus, and a few brutal NH winters are inevitable and will pose serious political consequences for countries like Germany that have to the point of too much reliance on unreliable renewable power. And AR6 is still 4 years away. Plenty of time for nature to show her cold hand in a 65 year Climate Cycle that warm peaked peaked ~16 years ago.

    • Probably much of the world is going to see things more 20-20 in 2020 as we bottom this solar cycle and winter likely gets savage, perhaps not seen in half or a whole century+…

  8. The worst case, if a substantial sum of money coercively invested in all these wonderful green ideas evaporates like a bad subprime mortgage, might be a new global financial crisis.“.

    If only that were true. This could get much worse than a mere financial crisis. The free world has a knack of getting out of financial crises in just a few years. Regrettably, the worst case would look more like Venezuela, but on a world scale. The reason is that the green push is not only about money – it is about total control.

    • +10
      the climate apparatchiks are no longer looking for an honest fact based outcome.
      they are religious fanatics who are unburdened by ethical considerations.

      • “they are religious fanatics who are unburdened by ethical considerations.”
        Yep, and their religion is that if they cover the planet with solar panels and wind turbines they will attract the attention of their alien forebears and signal them to come and rescue their progeny. Their work is done here: they have sowed the seeds of conflict by stirring up hatred and spreading lies, infiltrating the global scientific community and creating a vast conspiracy in order to weaken the world’s economies so much that the conspirators (code name “watermelons”) can gain global power and stifle all human endeavor. The aliens feel threatened, you see, by the rapid pace of human technology, and see our space exploration as the first step to intergalactic conquest, exploitation and colonization (as they know we are wont).

        The aliens would really rather humans stay on their own planet, and figure that if people are occupied with hating each other and blaming each other for all the things that might happen, they will never get anything done.

        So go ahead, Mike Jonas! Get on the bandwagon, Hunter! Spread the accusations and insults! It’s all part of the plan.

  9. And on final thought on this insurance issue.

    Having affordable private insurance has this nasty, anti-alarmist property: It allows one to be able to sleep at night. Alarmists hate that.

    Socialists want to make everything unaffordable to the Average Joe and his family, unless it is government subsidized, energy, insurance, housing, food/meats, healthcare.

    Flood insurance would unaffordable if it weren’t for the fact that people living in high risk areas wouldn’t be able to afford it unless the tax-payer was ultimately on the hook.

  10. Off Topic but about the new site:

    Reader does not allow me to “follow” the new site! When I click on “follow” it shows briefly “following” and then immediately revers to “follow”.

    Can this be fixed? Please?!

  11. Years ago I ran a business with a colleague, who was younger than me. He was concerned that if I died the business would be finished. He proposed key man insurance.’ ‘How much?’ I said. He mentioned an annual premium that would actually destroy the business anyway. Which I pointed out to him.

    “So if we dont insure and you die, the business is dead, but if we do insure and you don’t die, the business is dead as well?”


    “So the only successful outcome is if you dont die and we dont insure?”


    “No brainer”.

    I often think of this whenever I hear people talking about spending trillions mitigating ‘climate change’…

    PS my ex business partner died of prostate cancer a decade or more ago. I am mostly still alive…its a weird world…

  12. I think the biggest climate change risk for Insurance companies is that they indeed invest in renewables. The removal of subsidies which is inevitable in the future will dramatically collapse that industry. The loss to investors who have their funds managed by insurance companies will be substantial.

  13. Talk about the lunatics in charge, sounds just like the climate alarmist hype of Munich Re/Stefan Rahmstorf a few years back. Warren Buffett and other smart business people see this kind of hype for what it is, but then quite happily exploit it, just as they do from the tax credits (subsidies) for windmills.
    And speaking of lunacy here in Oz we hear that Malcolm Turnbull is considering introducing a carbon tax on new fossil fueled cars. Err…. to promote electric cars, in what must be one of the most sparsely populated countries on earth with the precious little reticulated electricity in its remote expanses, this has to be the crock of the day!

  14. Buffet is talking nonsense, ironically in a piece about insurance.

    If my house is worth £1 million, I would not pay £500,000 to insure it against a 1% risk of total loss.

    Every time we look at risk we have to look at the cost of avoiding or mitigating that risk. To ignore the costs is to say nothing whatsoever.

    And to the original post, if companies are facing these big losses losses, why are markets hitting record highs?

    • If some regions become too expensive to insure, insurance companies STILL don’t suffer. They just stop offering insurance in regions which can’t afford their product.

      Less affected regions will still pay plenty into the coffers of insurance companies.

    • Each individual must evaluate the risk/reward for their situation and the purchase of insurance must make sense. In 2016 FEMA remapped the flood zones in my area. My property was reevaluated and taken from the AE flood zone to X. I am no longer required to have flood insurance by my mortgage company, that saves me over $2000 per year. I did consider buying flood insurance voluntarily and with the X zone rating it would only cost me about $400 per year but decided not to as I am always high and dry no matter how much it rains. I also considered the surrounding topography/drainage and am confident I will always remain high and dry. Is that the right decision? I’ll let you know in 10 years.

  15. Follow the money.
    The climate con artists are after everyone’s money.
    They started off greedy, they are greedy, and they will be greedy.
    Steyer, Gore, and so many, many others: parasites bloated rich by sucking up the hsrd work and moneyvof others.

  16. Insurers Will Be Hard-Hit By Climate Change But They’re Not Investing In The Low-Carbon Economy

    In addition to being nonsense, this is a non sequitur.

    Irrespective of whether or not insurers will be hard-hit by climate change, they can only consider one factor in their investment decisions: risked return on investment. And this can only be measured in dollars.

    Insurance companies can’t afford to make investment decisions based on social justice warrior notions of what’s good for the planet because… they are “insurance companies.”

    • Doing the right thing is the domain of churches and charities. The domain of a business is doing the most profitable thing, within ethical bounds.

  17. years ago a friend used the fact insurance companies believed in agw as proof it was for real..
    i kid you not!
    any excuse to hike everyones premium cos a few rich folks with overpriced realestate and a lot of yuppie overpriced doodads ups the cost for all.
    when i said 30k was enough to refurnish my entire home 4x over- the lass on the insurance line went quiet, but, but, fridges tv washers etc?
    they expect you to be stupid enough to have a 2k fridge a 1k washer and a 5k tv.
    and if people with more money than sense keep buying at those prices..then we will all be unable to afford insurance anyway.
    buy a samsung smart washer and burn the house down and pay through the nose for the washer and the insurance…what a bargain;-/

  18. 2 main points:
    1. Doesn’t insurance of the sort they’re talking about (domestic?) happen on an annual basis?
    Weather happens on an annual basis, not climate.
    Government is in the business of long term insurance via planning and building regulation.
    Unless Knut is back on The Throne and planning on going surfing.
    (That’s what these muppets think isn’t it, they really do think we can control weather)

    2. Insurance companies already do take extra climate premiums – as I discovered when moving from a place with the word ‘hill’ (hence unlikely to flood) in it’s name to being an ordinary Golden Goose requiring ‘standard’ house & building insurance.
    If one’s insured property is within one half mile of ANY watercourse and irrelevant of any history of flooding or lack of flooding in the local area, your premium will be at least 50% higher than it would otherwise be.
    If there is ‘history’, think on double, triple or quadruple.
    For the UK, that half mile condition will apply to at least (pick an integer between 96 and 98) percent of the entire population.

    Where do they think all the money is coming from?

  19. That would be the Warren Buffet responsible for the rape of Wyoming with the Altar to Gore and Gaia, bird-killing, Buffet enriching turbines. Sorry, just do not care. Nor does Buffet.

  20. The hype machine is going at full blast. CNBC had a fake report yesterday on how much construction was going on in Boston Harbor even though models predicted the whole area will be under water within 50 years. Apparently, large companies like GE do not believe in the models!

    Also, contrary to the assertion that catastrophic covered claims are increasing they are actually declining. The price for catastrophic insurance is declining and companies like Warren Buffett’s General Re have pulled backed from this sector.

  21. “it is having to pay out more to policyholders as extreme weather events such as flooding, droughts, storms and heatwaves become more frequent and more severe

    No, it is not increasing any faster than rates of population change and general economic growth, which means there are more people insuring more things simply because they have more things to insure. At least it saves me having to read any further every time I see such untruths from global warmers. They really do appear to believe that saying something is happening is sufficient to make it true.

  22. Ah! Insurance seems like such a good thing, doesn’t it? Well, generally speaking, it is.

    Flooding by rivers. Flooding will damage and/or destroy your home and property.

    Flooding on a flood plain that has a history of recurring floods is a given, so why would anyone with an ounce of sense build there?
    Answer: Because it is a) cheaper than rolling country; b) easier to mow than a hill; c) flatland doesn’t require much energy to walk or run on.

    So when it floods repeatedly and your home and stuff are damaged, why are people surprised? And why do they keep building there? Answer: because they are just plain stupid about such things.

    Flooding is a random act of Nature, but if a place like a subdivision is built near a river that has a history of flooding, and the homes there get flooded regularly, you’d think people would have enough sense to NOT build homes there, wouldn’t you? No, they don’t. They go right on doing the same stupid things they’ve done before “because it’s so pretty here and the river is so beautiful” and they just do not learn.

    Keeping that in mind, because property and casualty insurance limits coverage to what is acceptable as a risk to the insurer. The insurer really does not give hoot about what you want. They only care about the premiums you provide. If, therefore, you build on a flood plain or near a river that has a history of flooding, you will have to get flood insurance through the national program because your carrier won’t cover you otherwise.

    Tornadoes and windstorm damage are another good example, because they are much more random and unpredictable than flooding, however the risk is part and parcel of your location..

    Warren Buffet is correct, but he left out one thing: insurance is the ultimate form of gambling, in which the carrier gambles that you will not suffer property or casualty damage and calculates your rates according to the history of your location and the risk pool for your area. In fact, Buffet’s comparison to Pascal’s Wager infers that while your risk of damage and/or losses may be historically low, you still need to act as though they will happen.

    The greenbeans can try to milk this, but my impression of their understanding is that they have little to none of what insurance is all about, and climate “change”, an imaginary risk, has nothing to do with prospective risks for a specific area. But we have to take into account that the entire “climate change’ gig is a scam and a con job from the get go, so remember that part, too.

  23. OF course for the “greens” this has nothing to do with insurance losses, etc. It is all about giving the government a reason to regulate and control the private sector.

    • Indeed, Edwin.
      You know something is up when environmentalists suddenly become ‘concerned’ about whether certain corporations will be able to remain profitable or not.

  24. “Climate change poses risks for insurance companies, so do responses to it by markets, businesses, consumers and governments,” says Dave Jones, California’s Insurance Commissioner, ”

    Well there you have it. Straight from the mouth of a California political appointee.

  25. Absolutely no one knows 1) what impact humans have on the climate (versus natural variation) and 2) whether warming is good or bad for us—my suspicion is that a warmer climate is good for us.

    Humans have survived by adapting to a changing climate. As for insurance, I think the normal—provable—factors should apply, and the alarmists have repeatedly proven themselves NOT to know the future.

    Good insurance practices: Factor is risk for proven risk, things like building on the shoreline in an area which repeatedly floods, or is subject to periodic hurricane damage.

    Bad practices: Government filling in with federal insurance where the private insurers will not insure. This leads to bad practices, and eventually bad outcomes. Then they repeatedly help people rebuild in places proven to be too risky. What we DO know is that politicians have no clue about how to factor in appropriate risk—or about anything else for that matter.

  26. Most homeowner’s property casualty policies exclude flood damage (Harvey in Houston). If you want flood coverage it has to be purchased from the federal government (probably subsidized by the rest of us). If you have a mortgage and you are in a flood zone, your mortgage company will probably require flood insurance.

  27. I work as an underwriting manager in an insurance company and I can assure you that climate change is not built into our rates as we need to remain competitive in the marketplace.
    Rather our rates are set on hard data largely relating to previous claims experience of which weather (not climate) is but a single minor component.
    There is certainly plenty of “talk” across the industry in Australia about how claim costs “might” be affected in future years but in the absence of hard evidence of increased claims costs most insurers have not and will not move. In this market any insurer charging higher rates due to climate change would quickly see their share of the market erode.
    The biggest concern for most motor insurers is the shift towards driverless cars. Because of the manner of their phased introduction into our society, insurers will have a difficult time trying to maintain an accurate measure of their expected claim costs for at least the next 10-20 years.
    The lawyers are going to make heaps in relation to claims involving driverless cars.

    • Any evidence driverless cars do or will kill and maim any more people than manned vehicles?

      Companies have been warned about the cost of not considering climate change. By no less an authority than the Bank of England.

      When it comes to science, Australian politicians have their heads up their jacksies. So no leadership there. Eh.

      • Stephanie, when you ask “Any evidence driver-less cars do or will kill and maim any more people than manned vehicles?” The answer is probably probably “no, there isn’t currently evidence as there are not sufficient driver-less vehicles on the road to provide a statistically valid data sample”.

        However, I think your asking the wrong question.The question is what difference in risk is there between driver-less and non-driver-less vehicles and how effectively will insurers be able to accurately measure that risk in the face of constant change in order to price their products appropriately.

        You might disagree but I can tell you insurance companies face significant challenges in responding to the pace of change in relation to use of driver-less vehicles. Having said this, Uber and other poorly regulated ride-sharing companies certainly represent a more immediate challenge. Climate change is a long last and for most companies would barely even be on the radar for the actuaries who help set the pricing.

        Any insurance companies in Australia (and elsewhere in the world) pricing climate change into their policies will lose market share at least for the foreseeable future. Until climate related losses (should they exist) are realized, accurately identified and modeled they will not be incorporated into insurance rates and pricing strategies.

        BTW I can tell you one insurer which has been offering an insurance product which included a carbon offset on their motor product at a very small additional premium (which is put towards planting trees) is now discontinuing that product as there was simply no demand for it.

        Be more critical in your thinking! Just cause the Bank of England says something does not make it true!

        • I would regard the BoE as an authority in financial matters. Your insurance companies ignore its warnings at their peril.

          I wouldn’t trust any of Australian politicians in government, but I suspect they reflect the Australian electorate. Good luck with worsening heatwaves and fires as global warming continues unabated. It’s going to hit Australia very hard.

          • I’m not an Aussie myself, but I’ve spent a lot of time there, most of it in the bush, and I am going to tell you something:

            Australian bush always will burn sooner or later. Always.. And it is much preferable for humans that it happens sooner rather than later. The aborigines figured this out about 40,000 years ago, as shown by the amount of charcoal in lake deposits. The current fire-suppression policies which prevent planned burns and effective firebreaks around settlements are insane. And the problem is exacerbated by the shift from european to australian plants in parks and gardens.

          • Stephanie I think you’ll find most Australian insurance companies don’t set their rates based on blind ideological thinking such as yours. Quality modelling based on hard accurate unadjusted data is king.

            Something a few climate scientists and those who follow in lockstep without exercising a single critical thought of their own are unlikely to ever learn.

            In fact if insurance companies used modelling of the same sort of quality as used by climate scientists most would go broke.

            Incidentally, the day I arrived in Australia in 1974 with my family having emigrated from the UK, there were severe bushfires all along the highway as we traveled from Sydney airport to our new home. Earlier in the year, in January 1974, Brisbane was hit with the worst floods it had faced since the 19th century and then on Christmas eve Tropical Cyclone Tracy flattened Darwin.

            You might rope in young people with stories of worsening heatwaves and fires but those of us who have been around a while are not so easily fooled. The only thing hitting Australian’s “very hard” are the increased costs of living arising from pointless efforts to fight an issue that doesn’t exist.

  28. This strikes me as an odd tactic, the “greens” are trying to enact additional fees or costs everywhere they possibly can. As a consumer when I see these fees in the future am I more likely to see them and change my behavior or just accept them as a part of buying the product I want?

    If the cost is spread out across a dozen different areas of my life I am less likely to notice the cost to my wallet and therefore less likely to change my behavior. If they focused on increasing the costs of just one area, such as gasoline taxes, then I will probably not drive as much or at least buy a smaller car with better MPG than my truck.

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