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Global Climate Change Digest
A Guide to Information on Greenhouse Gases and Ozone Depletion
Published July 1988 through June 1999

FROM VOLUME 11, NUMBER 10, OCTOBER 1998

NEWS...
Climate Change and the Insurance Industry

Item #d98oct48

On Oct. 15, The Ottawa Citizen (http://www.ottawacitizen.com/national/981015/1937706.html) quoted the executive director of the Institute for Catastrophic Loss Reduction as saying that last January’s ice storm was one of history’s most costly natural disasters on a per-capita basis, triggering insurance claims of $1.75 billion. The ice storm, the Red River flood, and the Saguenay flood have made the past three years the worst ever for weather-related insurance claims in Canada. Moreover, the insurance industry expects even more severe-weather claims in the future because of increased population density, economic prosperity and capital development, aging infrastructure to deal with extreme events, and climate change. To reduce the loss of life and property from severe weather and earthquakes, the insurance industry established the Institute for Catastrophic Loss Reduction as weather-related claims jumped from 2 to 10% of all insurance claims. It advocates investments to mitigate the damage caused by natural disasters when they occur. For example, an insurance-industry program to divert hailstorms from Calgary with cloud seeding has driven down the damage caused by hail there significantly.

On Oct. 21, NBC News pointed out that the cost of flood damage in Texas was nearly a half-billion dollars in a year that the cost of natural disasters has exceeded $55 billion. Moreover, nearly twice as many formal federal disasters have been declared per year in the nineties as in the eighties, and federal aid for natural disasters has more than tripled in the past decade. In fact, the ten most expensive natural disasters in the United States have all occurred during the past decade. Global warming, which loads the atmosphere with more moisture and energy, and burgeoning coastal populations have come under scrutiny as major contributors to these disasters.

In a UNEP news release (1998/COP4/2), representatives from 80 insurers from around the world announced a report prepared for presentation at COP4 that calls for the use of market incentives to address climate change and for clear frameworks for private-sector involvement in reversing the current trends in climate change. The report points out that climate change has potentially large implications for investment activities. It suggests (1) a study of the potential impacts of climate change on the insurance sector, (2) an assessment of the insurance industry’s current practices (underwriting and investments) and future products (to counter climate-change impacts), (3) the establishment of reporting standards for industries, and (4) the creation of a CO₂ Indicator.