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, 8:22am 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

 
 
 

17 weeks ago

Rift Widening Between Energy and Insurance Industries Over Climate Change

May 18 2014, 8:22am 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 just released by the Intergovernmental Panel On Climate Change that ascribe climate 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

2 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 new company (NewCo) and slashing the workforce of 20,000 by 3 ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

3 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" hits hom ...
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

Debate over decentralisation of financial powers begins in UK
London, Sep 19 (IANS/RAY) The Scottish referendum may have gone in the United Kingdom's favour, but the debate over de-centralisation of financial powers is not over yet.
 
 
Now a campaign to debunk myth about sugar
London, Sep 19 (IANS) As obesity and sugar related problems are faced by a huge number of people, a new campaign has been launched to inform and educate people about sugar and the role it can play as part of a healthy balanced diet.
 
 
Nepal, GMR sign landmark pact to boost energy cooperation
Kathmandu, Sep 19 (IANS) The Nepal government and the GMR-ITD Consortium Friday signed a landmark Project Development Agreement (PDA) to develop the 900 MW Upper Karnali hydropower project, aiming to boost bilateral power cooperation wioth India.
 
 
Childless couples too enjoy family meals
New York, Sep 19 (IANS) Couples without kids in the house are just as likely as adults living with young children or adolescents to eat family meals at home on most days of the week, says a US-based study.
 
 
 

Latest from the Network

Jessica Simpson astronaut dream dashed by ice cream
Jessica Simpson was put off becoming an astronaut because she hated the ice cream at space camp. The singer and fashion designer used to want to fly around space as her job but her aspirations were cruelly crushed...
Read more on Celebrity Balla
 
Lauren Conrad spent 11 months writing vows
Lauren Conrad spent 11 months writing her wedding vows. The 28-year-old designer, who tied the knot with 34-year-old William Tell at a winery in Santa Ynez, California earlier this month, was determined to blow him away...
Read more on Celebrity Balla
 
Liv Tyler doesn't want to know baby's sex
Liv Tyler wants to keep the sex of her unborn baby a surprise. The 'Leftovers' actress, who already has son Milo, nine, with ex-husband Royston Langdon, is reportedly expecting her first child with British boyfriend...
Read more on Celebrity Balla
 
Sharif accuses opponents of using human shields
Islamabad, Sep 19 (IANS/RAY) Pakistani Prime Minister Nawaz Sharif Friday accused cricketer-turned-politician Imran Khan and religious leader Tahirul Qadri and their parties of "inciting people to opt for mutiny". He...
Read more on Politics Balla
 
South Korean stars light up Asiad opening ceremony
Incheon, Sep 19 (IANS) South Korean stars shone brightly at the opening ceremony of the 17th Asian Games here Friday. The first appearance of stars was during the welcoming performance with the host nation's famous K-...
Read more on Sport Balla
 
Debate over decentralisation of financial powers begins in UK
London, Sep 19 (IANS/RAY) The Scottish referendum may have gone in the United Kingdom's favour, but the debate over de-centralisation of financial powers is not over yet. The BBC commented: "The fact that over 1.5...
Read more on Politics Balla
 
Now a campaign to debunk myth about sugar
London, Sep 19 (IANS) As obesity and sugar related problems are faced by a huge number of people, a new campaign has been launched to inform and educate people about sugar and the role it can play as part of a healthy...
Read more on Celebrity Balla
 
Nine involved in Karachi naval dockyard attack held
Islamabad, Sep 19 (IANS) Pakistan's Defence Minister Khawaja Asif Friday claimed nine men accused of involvement in Karachi naval dockyard attack have been arrested but two key accused remain at large, Geo News...
Read more on Politics Balla
 
Nepal, GMR sign landmark pact to boost energy cooperation
Kathmandu, Sep 19 (IANS) The Nepal government and the GMR-ITD Consortium Friday signed a landmark Project Development Agreement (PDA) to develop the 900 MW Upper Karnali hydropower project, aiming to boost bilateral...
Read more on Business Balla
 
Nicole Kidman says final goodbye to father
Sydney, Sep 19 (IANS) Actress Nicole Kidman broke down as she said her final goodbye to her father Antony Kidman at his funeral here Friday. The A-list Hollywood actress was accompanied by her husband Keith Urban and...
Read more on Celebrity Balla