The global weather future worth discounting
■"A New Worry for Insurers: Firms Looking as Whether Climate Change Could Affect Their Bottom Lines," by Dean Starkman, Washington Post, 5 October 2005, p. D1.
Interesting story about how insurance companies worldwide (more in Europe than in U.S.) are moving to look at how they may need to discount significantly against future higher losses due to global warming and climate change.
The government may not want to deal with this, but insurers have little choice. There's no doubt that more people are building in more risky locations, and that premiums for those locations must be dramatically raised (why should the rest of us pay for this lifestyle choice?), but it's also true that as the world grows ever more connected, the impact of global warming, while incremental over time, will only grow.
I say that putting aside the far more heated question of causality and response regarding energy profile. But no matter where you come down on those questions, there is no doubt that global warming is real.
Looking ahead to high-emission scenarios (referring to CO2), insurers are estimating they may need to increase their capital holdings by as much as 80-90 percent to cover expected hurricane/typhoon losses worldwide, meaning insurance costs would go up almost as much (more like 60%).
When those costs start being passed onto consumers, then watch the government get interested all of a sudden. Betcha it'll happen after a "closed door briefing"!