Global Warming Talk Heats Up At NAIC

Looking forward, he said insurers and policymakers can work together to build and rebuild property intelligently–updating building codes to reflect exposure to natural disaster risks associated with climate change. Additionally, he said they can combine to promote energy-efficient buildings as a priority in climate and energy policy.

Areas for possible cooperation were highlighted by two experts in separate fields citing different flaws with building codes.

Mr. Bushnell noted that energy-efficient buildings–such as those that are certified under the Leadership in Energy and Environmental Design (LEED) rating system–do nothing for improving coastal, wind and fire loss resistance.

Meanwhile, in an earlier presentation, Evan Mills, an analyst in the U.S. Department of Energy's Lawrence Berkeley National Laboratory, pointed out that structures built outside of flood zones and designed to withstand wind damage are not always the most energy-efficient.

Mr. Bushnell recommended building codes that promote both sustainable and resilient buildings.

Lindene Patton, climate product officer at Zurich Insurance, said the industry has a long history of reducing risks and can do so again with climate change if carriers are allowed to price according to the risks they assume.

"No amount of insurance will make a poor project/site/product/operation good," Ms. Patton said in her presentation. "Policymakers should engage insurance industry expertise and capital to most efficiently and effectively adapt to, and mitigate the risks of climate change."

However, she said insurers must be allowed to use their core skills to "send risk-based price signals."

Government indemnity funds or pools that spread or mask risks, she warned, "may inadvertently increase moral hazard and overall risk."

Panelists also discussed pay-as-you-drive (PAYD) insurance products–which price auto insurance policies according to miles driven–as a way to decrease driving and therefore cut auto emissions.

Justin Horner, transportation policy analyst for the Natural Resources Defense Council, said 14 percent of total emissions come from light-duty vehicles. Reducing that number, he said, requires less driving, lower emission cars and cleaner fuels.

PAYD insurance products, he added, address the "less driving" part of the equation, noting that drivers who choose such products have been shown to reduce their driving by an average of 5 percent.

It was pointed out that there is some controversy concerning how and what factors insurers may monitor when using telemetry devices with PAYD products. Devices installed in cars can track how, where and when a driver drives in addition to the miles logged.

In California, consumer advocates effectively lobbied to ban the use of GPS capabilities that can monitor where a driver is driving, said Adam Cole, general counsel at the California Insurance Department.

A representative from the Reinsurance Association of America held up his BlackBerry, noting it has GPS and that he can be tracked through the device, questioning why such capabilities in telemetry devices was different.

Mr. Cole said the California insurance department wanted the regulation authorizing the sale of PAYD products to be popular with everyone. If tracking a driver's location makes consumers uncomfortable, he said, the department was willing to ban it for now to gain wide acceptance.

California Insurance Commissioner Steve Poizner, Mr. Cole said, wanted the products authorized and used as much as possible for its environmental benefits.

Mr. Mills of the U.S. Department of Energy offered statistics showing the effects of climate change between the 1997 meetings in Kyoto and the current summit in Copenhagen.

In 1997, he said, scientists offered various projections regarding emissions. "We have outpaced even the high-end projections," according to Mr. Mills. "The world is now pumping 90 million tons of carbon dioxide into the air per day."

Climate-related effects are manifesting themselves now, he said, and will only increase. He said it is the extremes in temperatures that are becoming dangerous, even if the average temperature is not necessarily changing a lot.

Aside from temperature-related impacts, rising CO₂ is acidifying the ocean, which is eating away the shells of animals and impacting coral reefs, he said.

Mr. Mills also addressed the so-called "Climategate scandal," in which scientists' e-mails denigrating global warming opponents and advocating blocking their efforts were revealed. He said the "illegal breach" that exposed the e-mails represents a "desperate resurgence" of contrarian views. He also said the "debate" around the scandal seems to be about "fear and ideology."

As for the substance in the e-mails, Mr. Mills said it shows scientists are human, get frustrated and say bad things about each other.

However, Bob Detlefsen, vice president of public policy for the National Association of Mutual Insurance Companies, commented to Mr. Mills that he was disappointed by the "frivolous attempt" to explain away the e-mails.

He called it "remarkable evasion" to dismiss the content of the e-mails, and cited a Wall Street Journal article that contended the e-mails showed the lengths to which some will go to blacklist dissent, and that the computer models used to understand climate change are poorly designed.

Mr. Mills said if he was trying to evade the issue, he would not have brought it up in the first place.

Mr. Cole said the California Insurance Department will provide a guidance document online to assist insurers as they complete the Climate Risk Disclosure Survey developed by the NAIC.

Although the NAIC said it will not provide any further guidance, Mr. Cole said the California department will make available a four-page guidance document to help spell out what the survey questions mean. Some questions, he said, are not self-explanatory.