[Mb-civic] Insurance industry feels the heat of global warming - Derrick Z. Jackson - Boston Globe Op-Ed

[William Swiggard]

  Insurance industry feels the heat of global warming

By Derrick Z. Jackson  |  March 15, 2006  |  The Boston Globe

NEITHER TIM WAGNER nor Mike Kreidler imagined how climate change would 
intrude into state insurance regulation. Wagner, the director of the 
Nebraska Department of Insurance, said the reality is literally pelting him.

''While you can't correlate it directly, in the Plains states we've had 
severe droughts," Wagner, 63, said over the telephone. ''We've had fires 
in Texas and Oklahoma. There's a terrible drought in Arizona right now. 
When we get rain, we seem to get more and more severe hail. I just drove 
to Kansas City. My nephew is in Iraq and we went to see his family. Our 
brand-new car got pummeled while it was parked in north Kansas City. We 
didn't lose any glass, but plastic parts of the car rack and a piece of 
the bumper was hanging off. I don't think I remember being in a hail 
storm like that in my lifetime."

Kreidler, 62, the Washington state insurance commissioner, has seen his 
Pacific Northwest weather go from a drought emergency last winter to 
floods this winter. ''Obviously a trigger for the threshold of getting 
our attention was Katrina and the number of hurricanes we've been 
having," Kreidler said in a phone interview. ''But even in Washington 
the vagaries in weather patterns make you suspicious."

The suspicions moved Kreidler, a former Democratic congressman, and 
Wagner, a registered Republican, to form a task force for the National 
Association of Insurance Commissioners to assess the impact of climate 
change on the American insurance industry. They hope to join a 
discussion that has been going on for years in Europe, where insurers 
Swiss Re and Munich Re have warned of massive financial losses from 
storm patterns aggravated by global warming.

''When you couple changes in climate with changes in demographics where 
at this point 70 percent of our population resides within 50 miles of a 
coastline, and the fact that property values of those areas have 
increased significantly, it just seemed that we had to recognize the 
issue," Wagner said.

Munich Re calculated that last year was the most expensive on record for 
natural catastrophes, with losses of over $210 billion. Windstorm 
destruction in just the United States, the Caribbean, and Mexico cost 
$83 billion, most of it, of course, coming from Hurricane Katrina.

Swiss Re, in a joint report done with Harvard Medical School's Center 
for Health and the Global Environment and the United Nations Development 
Program, said, ''Many in the business community have begun to understand 
the risks that lie ahead. Insurers and reinsurers find themselves on the 
front lines of this challenge since the very viability of their industry 
rests on the proper appreciation of risk."

The insurance giant AIG, estimates that both Florida and New York have 
nearly $2 trillion each of insured coastal property exposure. 
Massachusetts is in fourth place in AIG's estimates at $662 billion. AIG 
said last October that six of the 10 most expensive hurricanes in US 
history occurred in just the prior 13 months.

''People are getting the idea that there is nowhere to hide on this 
issue," said Andrew Logan insurance program director for the 
Boston-based Ceres, which promotes corporate environmentalism and has 
been advising Wagner, Kreidler, and NAIC. Ceres says that insured losses 
due to weather have grown 10 times faster than premiums since 1971, and 
the percentage of total economic losses from catastrophic weather has 
grown from a ''negligible fraction in the 1950s to 25 percent in the 
past decade."

Wagner and Kreidler said they do not know yet what their task force will 
recommend. They do say that the time for Americans to hide from global 
warming is over. ''I don't want to have to get to the point where we 
have to ask, 'Do you pump water for vineyards, or run water for 
turbines, or save it for salmon in the Columbia?' " Kreidler said.

Wagner said, ''I don't know what, from a regulatory standpoint, we can 
do in terms of building codes being enforced and changes in land-use 
policy. We cannot change the weather. But it would be nice if the 
insurance industry played a role of some type."

He added, ''I'm a financial guy, not an activist. But we heard about 
storm models where it would not be unheard of to have a $120 billion 
storm . . . I don't know if we're prepared to be another Netherlands. 
But it does seem that we are too often in the position of cleaning up 
after the elephants run by."

http://www.boston.com/news/globe/editorial_opinion/oped/articles/2006/03/15/insurance_industry_feels_the_heat_of_global_warming/
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