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

 
 
 

22 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

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 new company (NewCo) and sla ...
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" hits home. ...
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

US defence department to create medical team for Ebola
Washington, Oct 20 (IANS) The US Department of Defense said Sunday the military is creating a 30-member team which will be tasked with providing emergency assistance in case of Ebola virus infection in the country.
 
 
Israel's Tamar gas field to sell gas to Egypt
Jerusalem, Oct 20 (IANS) Israel's Tamar gas field announced Sunday they have signed a bid to sell at least five billion cubic meters of natural gas over three years to private consumers in Egypt.
 
 
Liberian president calls for global support to fight Ebola
Monrovia, Oct 20 (IANS) Liberian President Ellen Johnson Sirleaf Sunday called on the international communities to join the country to fight the Ebola virus disease.
 
 
Spanish nurse tests negative for Ebola virus
London, Oct 20 (IANS) The Spanish nurse who became the first person to contract Ebola outside West Africa has tested negative for the virus, the government said.
 
 
 

Latest from the Network

Bush shoe-tossing painting hits record at Doha auction
Doha, Oct 15 (IANS/EFE) A controversial painting by Iranian artist Mahmud Obaidi, depicting an Iraqi journalist throwing shoe in 2008 at then US president George W. Bush, was sold for $62,500 at a Sotheby's auction in...
Read more on Celebrity Balla
 
US offers $45 mn bounty for eight terror leaders
Washington, Oct 15 (IANS) The US said Tuesday it is offering rewards totalling up to 45 million dollars for information on eight key leaders of the Al Qaeda in the Arabian Peninsula (AQAP) terrorist organisation. The...
Read more on Politics Balla
 
UNSC extends peacekeeping mission's term in Abyei
United Nations, Oct 15 (IANS) The UN Security Council (UNSC) has renewed the mandate of the UN peacekeeping mission in the Abyei border region between Sudan and South Sudan. In an unanimously adopted resolution, the...
Read more on Politics Balla
 
Ebola cases in West Africa could reach 10,000 per week: WHO
Geneva, Oct 15 (IANS) The World Health Organisation (WHO) has warned that the Ebola epidemic in West Africa could reach 5,000 to 10,000 cases per week by the first week of December. "Quite frankly, ladies and...
Read more on Business Balla
 
Turkey, Singapore sign strategic partnership agreement
Ankara, Oct 15 (IANS) Turkey and Singapore have signed a strategic partnership agreement to boost economic, political and cultural cooperation, as well as security collaboration, during the official visit of...
Read more on Politics Balla
 
Christina Aguilera is returning to 'The Voice' USA
Christina Aguilera will return to 'The Voice' USA next year. The 'Your Body' hitmaker, who previously shared a rotating spot on the judging panel with Shakira, has been replaced by Gwen Stefani this season as she is...
Read more on Celebrity Balla
 
Kesha's music producer hits back
Kesha is being countersued by her record company boss, Dr. Luke. The 41-year-old music producer, who runs Kemosabe Records, claims the 27-year-old 'Tik Tok' singer is a liar and is trying to extort him after she accused...
Read more on Celebrity Balla
 
Jason Derulo won't get back together with Jordin Sparks
Jason Derulo insists his split from Jordin Sparks is permanent. The 'Talk Dirty' hitmaker, who recently ended his relationship with the 'No Air' singer after three years of dating, has ruled out getting back together...
Read more on Celebrity Balla
 
Josh Groban feels 'very lucky' to be dating Kat Dennings
Josh Groban feels ''very lucky'' to be dating Kat Dennings. The 'Brave' hitmaker was very nervous before singing in front of the '2 Broke Girls' actress for the first time at the Carousel of Hope Ball in Beverly Hills,...
Read more on Celebrity Balla
 
Australian Richard Flanagan wins 2014 Man Booker prize
London, Oct 15 (IANS) The first Man Booker prize to allow American nominees was Tuesday night won by an Australian, with Richard Flanagan triumphing for a novel of love and war that tells the harrowing stories of...
Read more on Celebrity Balla