[Newfie]

I thought it might be interesting to have a thread onhow the Insurance Industry is being impacted by fossils fuel use and subsequently climate change. I know MUNICH RE AND LLoyds are adapting positions on the increasing cost of catastrophe related insurance, but don’t have any links ATM. Maybe other can contribute.

But here is an article out of Canada, roughly 1/10 the size of the USA and not generally subjected to hurricane damage.

https://www.theglobeandmail.com/busines ... re-rising/

Climate change is already having a significant effect on the property and casualty-insurance industry, with immediate business implications for insurers and their clients. More frequent extreme weather events have increased the level of weather-related insurance claims for floods, forest fires and other catastrophic events, globally and locally. For example, the Organization for Economic Co-operation and Development reports that annual losses from overland flooding have grown to more than US$40-billion annually in recent years; more flood events occurred in 2010-13 than in the whole decade of the 1980s.

Canadian insurers are now facing claims on natural catastrophes – floods, forest fires and other extreme weather events – of approximately $1-billion annually, according to the Insurance Bureau of Canada. This amount has grown from $400-million annually in previous decades. Claims are expected to continue to increase, as is damage to personal property and public assets. This aggregate number does not include smaller events that are not considered catastrophic (an event with total claims less than $25-million), so the full impact of climate change on Canadian insurers and clients is likely understated.

[onlooker]

Very nice thread you started Newf.
https://theconversation.com/how-a-billi ... -now-84854
$this->bbcode_second_pass_quote('', ' ') What enables Florida’s staggering growth against environmental odds? The answer, in part, comes down to how property insurance protects the state’s real estate against disasters. In 2015, Floridians spent US$10.8 billion on homeowners’ insurance to protect more than 6m properties. The total insured value protected by the state’s homeowners’ market is a soaring $2.1 trillion, roughly equal to the annual economic output of India

[ROCKMAN]

Newfie - Two factors to consider. First, as economies grow more infrastructure is built out. For instance hurricane rains flooding thousands of expensive homes in west Houston that didn't exist there 25 years ago. Second, wanna guess how many homes in Houston that weren't covered by flood insurance when Harvey blew thru that will be the next time we get hit with a hurricane. Of course, those aren't the only pertinent factors but they shouldn't be ignored either, should they?

[jawagord]

I think this is the guy that owns Swiss RE, but then again what does he know I think he actually likes insuring against hurricanes, great premiums vs infrequent payouts?

Berkshire Hathaway CEO Warren Buffett on Monday said he has not yet seen sufficient evidence that climate change is affecting weather events to a degree that would make him change the way his conglomerate's insurance businesses write policies.

Events such as Hurricane Sandy have raised concerns that global warming is increasing the intensity and frequency of so-called superstorms.

"I have not seen anything yet that would cause me to change the way we look at evaluating quakes, tornadoes, hurricanes by atmosphere. Now, that may happen some day," he told CNBC's "Squawk Box."

He added that the frequency of Florida hurricanes has been "quite low" for roughly the last decade compared to historical trends, and storms in the Sunshine State, Texas and the U.S. Southeast have been "remarkably benign."

Buffett delivered a similar assessment in last year's annual letter to shareholders. In that letter, he said climate change had not up until then "produced more frequent nor more costly hurricanes nor other weather-related events covered by insurance."

https://www.cnbc.com/2017/02/27/warren- ... e-biz.html

[Newfie]

No, they should be included. It shows how folks are evaluating the risk and looking for some relief.

So as folks want protection because of the perceived threat the industry sells them product. The more folks are arare if, or spooked by, the threat the more insurance they want.

The insurers then need to balance their costs against revenues. If they sell lots of insurance betting on a low likelihood and it turns out poorly, then they are in trouble. Both Lloyd’s and MunicRE, as well as all major companies, had to adjust downward earnings projections due to last years storms. They need to increase policy costs to cover that loss and insure themselves against future loss. So they need to be very sensitive to the potential losses.

That’s why I think the insurance industry is interesting. They are the ones who really get paid to place future bets. And they have money to do the research.

[Newfie]

Re Buffett...

Exactly what I would say if I was over extended and wanted to reassure investors, while I quietly worked to reduce those risks and prayed for a couple of quiet years.

[jawagord]

$this->bbcode_second_pass_quote('Newfie', 'R')e Buffett...

Exactly what I would say if I was over extended and wanted to reassure investors, while I quietly worked to reduce those risks and prayed for a couple of quiet years.

[Newfie]

“We continue to decline business when we believe prices are inadequate,” the company said in the quarterly report.”

That’s is the salient point. To stay ahead of the risk curve.

[Newfie]

From Scientific American

Warren Buffett, chairman of Berkshire Hathaway Inc., a major player in the insurance industry, highlighted the risk of hurricanes last month. Still, he has said the company is prepared and can rewrite its policies each year to account for those risks (Climatewire, Feb. 27).
That’s a common line from insurers. But it’s not realistic, said James Jones, director of the Katie School of Insurance & Financial Services at Illinois State University.
“You can do this on an individual basis,” Jones said. “You can attempt to reprice your policy, but it doesn’t mean that you’re going to get the price you want.”
Insurers cannot block off entire regions from their business, like the southeastern United States, which is acutely exposed to hurricanes and flooding.”

https://www.scientificamerican.com/arti ... -insurers/

[jawagord]

$this->bbcode_second_pass_quote('Newfie', '�')��We continue to decline business when we believe prices are inadequate,” the company said in the quarterly report.”

That’s is the salient point. To stay ahead of the risk curve.

[Newfie]

https://www.climateliabilitynews.org/20 ... ma-harvey/


$this->bbcode_second_pass_quote('', 'T')he two hurricanes aren’t just drawing attention for their devastating financial toll. Irma and Harvey highlight a Category 5 problem slamming the insurance industry: how to manage the emerging climate-related risks for homes, businesses and governments as global warming fuels bigger and more costly catastrophes.

The insurance industry, which is responsible for managing society’s risks, has been vocal in acknowledging the threat of climate change. But two reports issued last December by a group of the world’s largest insurers also concede that they remain largely unprepared to address climate risks in the communities they serve.

[KaiserJeep]

In fact, insurers have routinely blocked off entire areas of the country, following natural disasters. When I moved to California in 1986, I had earthquake insurance, That became impossible to get at any price in 1989 following the Loma Prieta earthquake. When legislation was passed that required the insurance companies to offer earthquake coverage again, they did so. However nowadays the rates are so high, almost nobody can afford to add earthquake coverage to their policy.

[onlooker]

The problem with CC, is the large degree of uncertainty involved. Risk assessment is quite difficult. when the timing, frequency and severity of catastrophic events are open to great uncertainty. Such is the case in my opinion with CC

[Newfie]

That’s when insurance works, they play on the uncertainty to get you to enroll, essentially they are making a bet that, on average, losses will be less than premiums.

What’s happening is the losses are going up faster than premiums. Then they are loosing the bet.

[KaiserJeep]

What happened in the case of California's earthquake insurance was a new level of claims higher than ever before, making the Loma Prieta earthquake in 1989 the most expensive disaster in history, up until hurricane Sandy came along later.

Everybody was of course underinsured, since building costs have been escalating in California for decades. But the new reality that the insurance companies discovered was an extensive list of "how to maximize your insurance claim" documents found on the web, with helpful suggestions such as "don't take the first lowball offer". Some people got too greedy, not all such claims are settled today, 30 years later. I'd say the lawyers are the winners there.

The other thing that happened is that this earthquake and another in the LA area a few years later depleted the Insurance Superfund. The we had the infamous hurricanes in FL and the North Atlantic states, which put the Superfund into red ink.

[onlooker]

This all highlights, the point that Insurance is a risky business. And customers must bear the risk if going without. But if the insurance industry is being debilitated, it will pass costs to the customers, as we see now happening in Miami. In turn consumers may resign themselves to risk, if the costs of insurance become prohibitive

[kublikhan]

$this->bbcode_second_pass_quote('Newfie', 'R')e Buffett...

Exactly what I would say if I was over extended and wanted to reassure investors, while I quietly worked to reduce those risks and prayed for a couple of quiet years.

[Newfie]

The point of the thread is to look at insurance companies and follow their decisions. If CC is a real threat then the insurance companies will likely be the one to first identify and quantify the risk.

What happened with Buffet is not very relevant.

[Outcast_Searcher]

$this->bbcode_second_pass_quote('Newfie', 'R')e Buffett...

Exactly what I would say if I was over extended and wanted to reassure investors, while I quietly worked to reduce those risks and prayed for a couple of quiet years.

[Newfie]

OK, I’ll take that as a carefully considered opinion. Thanks.