Free Newsletters - Space News - Defense Alert - Environment Report - Energy Monitor
. Earth Science News .




DISASTER MANAGEMENT
Insurance industry paying increasing attention to climate change
by Staff Writers
Berkeley CA (SPX) Dec 17, 2012


illustration only

The insurance industry, the world's largest business with $4.6 trillion in revenues, is making larger efforts to manage climate change-related risks, according to a new study published in the journal Science.

"Weather- and climate-related insurance losses today average $50 billion a year. These losses have more than doubled each decade since the 1980s, adjusted for inflation," says the study's author Evan Mills, a scientist in Lawrence Berkeley National Laboratory (Berkeley Lab)'s Environmental Energy Technologies Division. "Insurers have become quite adept at quantifying and managing the risks of climate change, and using their market presence to drive broader societal efforts at mitigation and adaptation."

Hurricane Sandy is only the most recent U.S. example of the kinds of increasing liabilities posed by severe weather events in a changing climate.

Managing a portfolio of $25 trillion in assets, similar in size to mutual funds or pensions globally, the insurance industry has become a significant voice in world policy forums addressing the issue, as well as a market force, investing at least $23 billion in emissions-reduction technologies, securities, and financing, plus $5 billion in funds with environmental screens, seeing risks to investments in polluting industries and opportunities in being part of the clean-tech revolution.

Risk and opportunity
"Where there are risks, there are opportunities," writes Mills.

Responding to shareholder, regulatory, and market forces, three global initiatives [UN Environment Program Finance Initiative (1995), ClimateWise (2007), and the Kyoto Statement (2009)] have compelled 129 insurance firms from 29 countries to engage in activities including: supporting climate research; developing climate-responsive products and services; raising awareness; reducing in-house greenhouse gas emissions; quantifying and disclosing climate risks; incorporating climate change into investment decisions; and influencing public policy. The ultimate goal of these industry activities is reducing climate-related losses among their customers as well as reducing their own exposure to risk, which is rising in step with the magnitude and frequency of extreme weather-related events.

These insurers, together with reinsurance companies (the insurers of insurance companies), industry associations, brokers, catastrophe-loss modelers, and partners in the research community, have been using sophisticated analytical tools to quantify and diversify their exposure to climate change risk, more accurately price and communicate risk, and get adaptation and loss-prevention efforts up and running.

"Insurers from North America, Asia, and Europe worked with scientists through the three latest Intergovernmental Panel on Climate Change assessments dating back to the mid 1990s to better understand their exposure to climate change risk," says Mills. "They expanded these collaborations into such projects as harmonizing economics-based insurer catastrophe models with climate models."

New insurance products and services
According to the study, 1,148 climate change adaptation and mitigation activities have emerged from 378 entities in 51 countries, representing $2 trillion (44 percent) of industry revenue. For example, insurers have brought at least 130 products and services to market encouraging the spread of more energy-efficient homes and commercial buildings by paying claims that encourage rebuilding to a higher level of energy efficiency after a loss. At least 65 other insurance industry products address the risks and opportunities of the renewable energy industry.

Pay-as-you-drive insurance policies, now numbering nearly 3 million, offer auto insurance based on number of miles driven rather than a fixed premium. GPS technologies verify driving distances, and policyholders benefit from a more accurate insurance premium.

The price signal of lower premiums for miles actually driven could reduce U.S. driving by 8 percent, and oil use by 4 percent, reducing the cost of driving by $50 to $60 billion per year because of a lower chance of accidents and reduced traffic congestion.

Another innovative class of insurance products insures financial shortfalls if projects underperform at delivering energy savings or low-emissions power generation. Some insurance products manage the risks of carbon-trading transactions, such as wildfires releasing carbon sequestered in forests.

By assuming these risks and engineering the insured programs to minimize their losses, insurance companies pursue a broader policy objective of verifiable, bankable, persistent emissions reductions-all of which reduce the overall risks associated with climate change.

Leading by example is another type of climate change risk mitigation strategy being seen increasingly in the insurance industry. Many insurers have programs to reduce their own greenhouse gas emissions and purchase offsets, and 26 claim they have reached carbon-neutrality. A creative example is the mangrove restoration by Tokio Marine and Nichido Insurance Co. taking place in India and southeast Asian countries.

Begun in 1999, this project is close to reaching its goal of restoring 8,200 hectares (more than 20,000 acres) of mangrove forests in coastal areas of seven countries. Mangrove reforestation reduces exposure of coasts to storm damage, and helps sequester carbon.

Developing world activities
"In the developing world, poor populations have little access to insurance," says Mills. Decades ago, government and non-profit entities began issuing microinsurance policies that offer modest coverage in health, property, and life insurance for small premiums.

Commercial insurers have followed suit, making tens of millions of these policies possible by integrating actuarial and environmental sciences into insurance models. Some of these products incorporate remote sensing and climate-sensitive methods to analyze the risks to crops and livestock.

There remain numerous opportunities to expand the innovation in the insurance industry, Mills believes. Some assert that the industry hasn't done enough.

The federal government is the insurer of last resort for floods and crops in the U.S., but these climate risk techniques have not been applied to federal insurance programs. There's also not much research in the field of loss modeling under future climates, or comparative risk assessments of climate change response options, which could help guide policymakers about how to adapt to changing climate.

Mills' study nonetheless demonstrates that market mechanisms are playing a large and growing role in the insurance industry's efforts to address the consequences of a changing climate.

.


Related Links
Lawrence Berkeley National Laboratory
Bringing Order To A World Of Disasters
A world of storm and tempest
When the Earth Quakes






Comment on this article via your Facebook, Yahoo, AOL, Hotmail login.

Share this article via these popular social media networks
del.icio.usdel.icio.us DiggDigg RedditReddit GoogleGoogle




Memory Foam Mattress Review
Newsletters :: SpaceDaily :: SpaceWar :: TerraDaily :: Energy Daily
XML Feeds :: Space News :: Earth News :: War News :: Solar Energy News





DISASTER MANAGEMENT
Philippines says rebels violating typhoon truce
Manila (AFP) Dec 15, 2012
The Philippine government on Saturday accused Maoist rebels of violating a self-imposed truce in typhoon-hit areas with attacks on government forces involved in rescue and relief work. The New People's Army guerrilla group began a 29-day unilateral ceasefire on December 5 to allow what it said would be unhampered rescue and relief work for victims of Typhoon Bopha that had struck the previou ... read more


DISASTER MANAGEMENT
Insurance industry paying increasing attention to climate change

Philippines says rebels violating typhoon truce

Great balls of China to defend against 'apocalypse'

Apocalypse... but not as we know it

DISASTER MANAGEMENT
Apple shares extend downward slide

Jury rules Apple iPhone violated MobileMedia patents

XTAR Wins $8 Million In New Business

Boeing, BMW Group to collaborate on carbon fiber recycling

DISASTER MANAGEMENT
Russian center to study 'killer' waves

Report warns of Colorado River supply

Will climate change cause water conflict?

Fish have enormous nutrient impacts on marine ecosystems

DISASTER MANAGEMENT
Australia plans drill of ancient Antarctic ice core

More ice loss through snowfall on Antarctica

Greenland ice sheet carries evidence of increased atmospheric acidity

Warm sea water is melting Antarctic glaciers

DISASTER MANAGEMENT
Brazil fears mad cow case will force cut in beef prices

Dead or alive? A new test to determine viability of soybean rust spores

Chemical analysis reveals first cheese making in Northern Europe in the 6th millennium BC

China, S.Africa suspend Brazil beef imports: source

DISASTER MANAGEMENT
Philippines typhoon death toll tops 1000

Tsunami caused long-term ecosystem change in the Caribbean

Philippines typhoon death toll tops 900

Philippines typhoon toll tops 700, hundreds missing

DISASTER MANAGEMENT
DR Congo leader says defence top priority after rebel takeover

Ceramic cookstoves did not lower child pneumonia risk in rural Kenya

UN, US lead condemnation of Mali PM's ouster

New Mali PM has 'respect' of US

DISASTER MANAGEMENT
Technology has spawned 'new brain'

What howler monkeys can tell us about the role of interbreeding in human evolution

Africa's Homo sapiens were the first techies

Skeletons in cave reveal Mediterranean secrets




The content herein, unless otherwise known to be public domain, are Copyright 1995-2014 - Space Media Network. AFP, UPI and IANS news wire stories are copyright Agence France-Presse, United Press International and Indo-Asia News Service. ESA Portal Reports are copyright European Space Agency. All NASA sourced material is public domain. Additional copyrights may apply in whole or part to other bona fide parties. Advertising does not imply endorsement,agreement or approval of any opinions, statements or information provided by Space Media Network on any Web page published or hosted by Space Media Network. Privacy Statement