360° Coverage : Rift Widening Between Energy and Insurance Industries Over...

2 Updates

Rift Widening Between Energy and Insurance Industries Over Climate Change

May 18 2014, 8:21am CDT | by

Being a big business, the insurance industry is a strong backer of free enterprise and its laissez-faire leaders. But a rift could be developing now that some major carriers are staking claims in...

Filed under: news

 
 
 

22 weeks ago

Rift Widening Between Energy and Insurance Industries Over Climate Change

May 18 2014, 8:21am CDT | by

Being a big business, the insurance industry is a strong backer of free enterprise and its laissez-faire leaders. But a rift could be developing now that some major carriers are staking claims in the climate change cause while many of their congressional backers have remained skeptical of the science.

For insurers, it’s not about the political machinations but rather, it’s about the potential economic losses. If even part of the predictions hold — the ones released by the Intergovernmental Panel On Climate Change that ascribe temperature change to humans with 95 percent certainty — then the rate of extreme weather events will only increase and the effects would be more severe. That, in turn, would lead to greater damages and more payouts.

“The heavy losses caused by weather-related natural catastrophes in the USA showed that greater loss-prevention efforts are needed,” says Munich Re board member Torsen Jeworrek.

He says that the United States suffered $400 billion in weather-related damages in 2011 and insured losses of $119 billion, which were record amounts. In 2012 — and despite Superstorm Sandy — losses were well above the 10-year averages at $165 billion total, of which insurers paid $50 billion. In 2013, insurance companies paid out, globally, $45 billion in claims, says Zurich-based Swiss Reinsurance Co., adding that the United States accounted for $19 billion of that.

Meantime, Standard & Poor’s Ratings Services just issued a report saying that the credit ratings of sovereign countries would be affected by global warming. It pointed to Typhoon Haiyan in the Philippines, heavy flooding in Great Britain and the record cold temperatures this past winter in the United States, all of which caused economic damages and disrupted business practices.

But it adds that the developing nations in Africa and Asia are most at risk, namely because they are low-lying regions that are heavily reliant on farming and agriculture. At the same time, they are not in a financial position to handle catastrophic events.

Climate change is likely to be one of the global mega-trends impacting sovereign creditworthiness, in most cases negatively,” says S&P, in its report. It’s a view generally supported by Lloyd’s of London, which just said that climate-associated risks must be considered when underwriting policies.

To be sure, not all climate scientists are convinced that aberrant weather patterns are linked to global warming, even though they argue that rising temperatures are associated with burning fossil fuels. One such expert is Richard Muller, from University of California at Berkeley, who says that hurricanes and tornados have actually decreased with time.

“Global warming is real and it is caused by humans,” he says. But, “Climate change is not contributing to more intense tornados and hurricanes.”

Meantime, the Organization for Economic Cooperation and Development argues that governments must take the lead role to combat climate change. It notes that unlike the 2008 financial crisis, world leaders have not conceived a “climate bailout option.”

With all the clout that the insurance industry has on Capitol Hill, why is it not crusading for action on climate change? In fact, only 23 of the 184 insurance companies that the investor network Ceres surveyed say that they have a comprehensive strategy to deal with climate change. That’s ironic, given that coastal cities around the world are expected to incur $50 billion in annual losses through 2050, adds the OECD — a tab that would fall, in part, on insurers.

Not all carriers are “passive.” This past week, Farmers Insurance Co., a unit of the Zurich Insurance Co., filed suit against the city of Chicago for its alleged failure to prevent flood-related damages that it says are associated with climate change. It maintains that city officials are aware of the potential fallout from climate-related weather and yet they have done nothing to mitigate such events. As a result, it paid out millions in claims a year ago tied to storms in the city.

Other insurers, meanwhile, have broken ties to the Heartland Institute that denies man-made climate change, arguing instead that temperature fluctuations are a cyclical phenomenon. That’s one reason why Allied World Assurance Co., State Farm, Renaissance Re and XL Group are no longer financial supporters of the group.

“Numerous studies assume a rise in summer drought periods in North America in the future and an increasing probability of severe cyclones relatively far north along the US East Coast in the long term. The rise in sea level caused by climate change will further increase the risk of storm surge, adds Peter Höppe, head of Munich Re’s Geo Risks Research.

When it comes to a fix, the public sector will lead — but only when pushed by its citizenry or powerful financial concerns. Here, a potential battle is brewing between certain energy entities and the insurance industry that would pay many climate-related claims. Just who wins will depend on how severe the weather becomes and the financial toll it leaves behind.

 
Update
2

7 weeks ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a ne ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

7 weeks ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the double tragedies of MH370 and MH17" hit ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Ebola not to upset Africa's overall growth: IMF
Harare, Oct 23 (IANS) The Ebola outbreak in West Africa, which has claimed 4,500 lives, will have minimum impact on continent's overall growth, a top International Monetary Fund (IMF) official said Thursday.
 
 
Second MERS case reported in Qatar
Doha, Oct 23 (IANS) A 43-year-old man in Qatar has tested positive for Middle East Respiratory Syndrome (MERS) in the second confirmed case of the deadly virus in 10 days, media reported Thursday.
 
 
OPEC daily basket price falls again
Vienna, Oct 23 (IANS/WAM) The basket of 12 crude oils of the Organization of Petroleum Exporting Countries (OPEC) closed at $81.94 a barrel Wednesday compared to $82.09 Tuesday, the OPEC Secretariat said.
 
 
Music therapy reduces depression in kids, adolescents
London, Oct 23 (IANS) Music therapy reduces depression in children and adolescents with behavioural and emotional problems, a study found.
 
 
 

Latest from the Network

Second MERS case reported in Qatar
Doha, Oct 23 (IANS) A 43-year-old man in Qatar has tested positive for Middle East Respiratory Syndrome (MERS) in the second confirmed case of the deadly virus in 10 days, media reported Thursday. The patient had...
Read more on Business Balla
 
Two people die in Pakistan bomb blast
Islamabad, Oct 23 (IANS) At least two people were killed and 12 others injured in an explosion that took place in Pakistan's Balochistan province Thursday, media reported. The bomb was planted on a motorcycle, Dawn...
Read more on Politics Balla
 
Trott extends contract with Warwickshire till 2017
London, Oct 23 (IANS) England batsman Jonathan Trott, whose mental issues led to his abrupt departure from last winter's Ashes tour, has confirmed his successful comeback to competitive cricket by signing a new three-...
Read more on Sport Balla
 
Srikanth, Kashyap big movers in BWF rankings
Kuala Lumpur, Oct 23 (IANS) Indian men shuttlers Kidambi Srikanth and Parupalli Kashyap jumped seven places each in the latest Badminton World Federation (BWF) rankings released Thursday while Olympic bronze medallist...
Read more on Sport Balla
 
Alvin Stardust dead
London, Oct 23 (IANS) English singer Alvin Stardust died after a short illness. He was 72. Stardust's manager confirmed the news about his demise Thursday, reports mirror.co.uk. He was recently diagnosed with...
Read more on Celebrity Balla
 
Indian man reunited with family after 40 years
Dubai, Oct 23 (IANS) An Indian man, who had disappeared from his hometown in Kerala nearly 40 years ago, has been found by his family at a hospital in Dubai in the UAE, a newspaper report said. Now in his 60s, Abdulla...
Read more on Politics Balla
 
Srikanth, Kashyap, Saina rise in world rankings
Kala Lumpur, Oct 23 (IANS) Indian men shuttlers Kidambi Srikanth and Parupalli Kashyap jumped seven places each in the latest released Badminton World Federation (BWF) rankings Thursday while Olympic bronze medallist...
Read more on Sport Balla
 
Flintoff signs for Big Bash side Brisbane Heat
Brisbane, Oct 23 (IANS) Former England captain and all-rounder Andrew Flintoff, who retired from international cricket in 2009, Wednesday confirmed that he will play for Brisbane Heat in the Big Bash League (BBL) this...
Read more on Sport Balla
 
OPEC daily basket price falls again
Vienna, Oct 23 (IANS/WAM) The basket of 12 crude oils of the Organization of Petroleum Exporting Countries (OPEC) closed at $81.94 a barrel Wednesday compared to $82.09 Tuesday, the OPEC Secretariat said. The new OPEC...
Read more on Business Balla
 
Lopez to sign multi-million dollar deal?
Los Angeles, Oct 23 (IANS) Singer-actress Jennifer Lopez is reportedly in the final stages of securing a multi-million dollar deal to perform in Las Vegas. The 45-year-old is being offered $350,000 per show at The...
Read more on Celebrity Balla