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Insurance industry worried about global warming
September 2, 1996
Web posted at: 1:45 p.m. EDTFrom Correspondent Sharon Collins
(CNN) -- People trying to curb global warming are getting support from an unlikely source -- the insurance industry. But there's an economic reason for the strange combination of forces.
As more people move to coastal areas, severe storm activity has an increasingly costly impact. And the insurance industry is looking for ways to keep its head above water.
"The insurance industry is deeply concerned about the shift in our population and the increase of insured values in high-risk areas," says Frank Nutter of the reinsurance industry -- the ones who insure the insurance companies. "People are putting themselves at greater risk, particularly in a climate-change environment."
Between 1989 and 1994, private and government insurers paid more than $67 billion in storm damage claims -- $20 billion more than was paid out during the previous five years.
And, as some companies run for cover, the nation's top insurer -- the federal government -- is assuming the task of insuring those considered too risky.
1992's Hurricane Andrew, which ripped through the Bahamas, south Florida and Louisiana, causing $25 billion in property damage, served as the industry's wake-up call. In the giant storm's wake, 10 small insurance companies went belly up, and Florida's top two -- State Farm and Allstate -- paid out billions in damage claims.
And on top of that is the amount spent by federal and state agencies.
Industry officials say that if climate change -- like global warming -- is producing more frequent and severe storms like Andrew, both insurers and their clients will suffer.
They warn that more storms will mean higher insurance rates -- and any hike in rates will likely be distributed among all the insured, whether they live in high-risk areas or not.
But the biggest fear is that some areas could not get insurance at all.
Consequently, the industry is spending billions on research to better understand the impact humans have on climate change. And the concern extends beyond the single issue of global warming. Insurers are looking for more immediate ways to minimize their losses, such as tighter building codes in high-risk areas.
And the insurance industry took center stage at a U.N. conference on climate change in Geneva last July, where several industry giants called for reductions in greenhouse gas emissions.
A majority of scientists believe that hurricanes will become more common if some changes aren't made to human behavior. But as science debates the impact of climate change, the insurance companies plan for the future -- global warming or not.
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