NRDC: Insurers Running from Climate-Change Risks; Insurer Group Disputes Figures

The National Resources Defense Council (NRDC) says private insurers are turning away from climate-change risks, sending an “unmistakeable signal” that such risks are increasing and that costs to society are climbing, but an insurance industry association disputed some of the figures used to arrive at that assumption.

In a report, the NRDC says taxpayers shelled out nearly $100 billion last year through federal insurance to clean up weather-related damage caused by climate change in 2012 -- three times the cost of claims paid by private insurers.

The NRDC says 2012 was the second-most expensive weather catastrophe year in the history of the U.S., totaling more than $139 billion from losses related to forest fires, crop loss, and wind damage, and the group contends that  private insurers only covered a quarter of these costs.

Superstorm Sandy left the National Flood Insurance Program (NFIP) nearly $30 billion in debt. According to the NRDC, the program already doubled in size from $692 billion to $1,293 billion over the past decade as private insurers began to cease offering affordable policies to weather-beaten customers following Hurricane Katrina. 

“The fact that private insurers are leaving the table sends an unmistakable signal. It tells us that climate change risks are increasing and their costs to our society are climbing,” says Tom Steyer, founder of Farallon Capital Management and co-founder of OneCalifornia Bank. 

Dan Lashof, director of the NRDC’s Climate & Clean Air Program, says the private sector is “being self-interested, as is expected of any commercial business.” 

The NRDC says the federal government spent more on dealing with weather events than it did on  social services ($96 billion), housing assistance and income security ($65 billion), veteran’s benefits ($57 billion) and the alternative energy investments that can reduce carbon emissions in the future, NRDC contends. 

Besides the NFIP, the government provides relief to states after major weather disasters through programs like the Federal Emergency Management Agency (FEMA). Congress grants FEMA $1.7 billion annually to cover weather-related damages after $500 million, however, emergency supplements authorized after storms Katrina and Sandy totaled more than $140 billion in the past decade. 

But Robert Detlefsen, vice president of public policy for the National Association of Mutual Insurance Companies, responded to the NRDC contentions, stating, “NAMIC takes no position on the NRDC’s policy prescriptions for addressing climate change, but we question some of the figures and assumptions that appear in their news release. The release says that total U.S. disaster-related losses in 2012 came to ‘more than $139 billion’ and that ‘private insurers only covered about 25 percent of the costs, leaving taxpayers to pay the bulk of the remaining costs,’ which the NRDC estimates at $100 billion.

“However, according to a report by Swiss Re, total losses in 2012 for all of North America were $119 billion, of which private insurance covered $65 billion, more than half the total.

“Moreover, it’s important to note that total losses include damage to things like public infrastructure – roads, bridges, and public transit systems – which is not ordinarily covered by private insurance.  

“In sum, the NRDC’s claim that private insurers are ‘leaving the table’ appears to be based on inaccurate data and faulty assumptions. Private insurance for losses due to windstorms and wildfires is readily available to anyone who chooses to purchase it. Flood insurance has generally not been available in the private insurance market since 1968, but is readily available through the National Flood Insurance Program.”

The NRDC urges the government to allocate more funds to preventative measures such as the development of infrastructure that will soften the blows of increasingly powerful storms, and states that lowering carbon emissions by a third by 2015 will cost the government $4 billion, but save $60 billion in cleanup costs.  

Comments

Resource Center

View All »

Do Your Clients Hold The Right CDL License?

Learn about the various classes of CDL Licenses and the industries that are impacted by...

Integrated Content & Communications: A Key Business Issue For Insurers

Insurers are renewing their focus on top line growth, and many are learning that growth...

High Risk Insurance Coverage in the E&S Market

Experts discuss market conditions, trends and projected growth in a rapidly changing niche.

Top E-Signature Security Requirements

This white paper covers the most important security features to look for when evaluating e-signatures...

EPLI Programs Crafted Just For Your Clients

Bring us your restaurant clients, associations and other groups and we’ll help you win more...

Is It Time To Step Up And Own An Agency?

Download this eBook for insight on how to determine if owning an agency is right...

Claims - The Good The Bad And The Ugly

Fraudulent claims cost the industry and the public thousands of dollars in losses. This article...

Leveraging BI for Improved Claims Performance and Results

If claims organizations do not avail themselves of the latest business intelligence (BI) tools, they...

Top 10 Legal Requirements for E-Signatures in Insurance

Want to make sure you’ve covered all your bases when adopting e-signatures? Learn how to...

Get $100 in leads with $0 down!

NetQuote's detailed, real-time leads have boosted sales for thousands of successful local agents across the...

PropertyCasualty360 Daily eNews

Get P&C insurance news to stay ahead of the competition in one concise format - FREE. Sign Up Now!

Advertisement. Closing in 15 seconds.