The Future

Your insurance premium is about to rise like the sea levels

Insurers are adjusting their models to account for the onslaught of fires, floods, and weather disasters that will come with a warming climate.

The Future

Your insurance premium is about to rise like the sea levels

Insurers are adjusting their models to account for the onslaught of fires, floods, and weather disasters that will come with a warming climate.
The Future

Your insurance premium is about to rise like the sea levels

Insurers are adjusting their models to account for the onslaught of fires, floods, and weather disasters that will come with a warming climate.

Climate change means disasters are becoming the norm. In New York, Superstorm Sandy racked up an estimated $50 billion in property damage and became the second costliest storm after Katrina. In California, wildfires ravaging the state making the 2018 season the deadliest and most destructive to date. Last week, major floods tormented Midwestern states as snowmelt and heavy rains overwhelmed rivers.

This is the reality that Munich Re, the world’s largest reinsurance firm, is preparing for, as in a new report it blamed global warming for the $24 billion of loses in the California wildfires. Currently, insurance companies don’t factor climate change into their coverage calculations. As they start to account for the inevitable warming and attendant floods, fires, and extreme weather, premium price hikes may make insurance difficult or even impossible to afford for everyday individuals in the very near future.

According to Munich Re’s analysis, detailed in a report Thursday from The Guardian, the state’s worst fires occured in years marked by “exceptional dryness” between May and October. Abnormally high summer temperatures coupled with more humid, wet winters lead to new forest growth that turns to tinder, once the heatwaves preceding a fire roll in.

The only other time global warming has been credited for a disaster by an insurer was in 2014 following Superstorm Sandy, when Lloyd’s Exposure Management and Reinsurance team found that sea level rise due to climate change was behind a 30 percent increase in Manhattan’s surge-related losses. In that report, Lloyd’s called on other insurers to modify their catastrophe modeling tools in order to “keep pace” with climate change.

Specific, singular weather events aren’t evidence of climate change in and of themselves (i.e. climate change is or is not happening because there is a polar vortex or heat wave), but patterns of extreme weather and repeated disasters are one result of climate change. This will increasingly lead to financial risks insurance has yet to factor in.  

An NPR investigation earlier this month found federal disaster aid more often goes to white, wealthier Americans, leading them to grow even richer following a disaster and widening the wealth gap further. This along with the Munich Re report underlines something climate activists have been trying to call attention to for years: climate change will only exacerbate current inequality and disproportionately affect those in already precarious socio-economic standing.