Insurance and Climate Change column

Climate Change And Gisele, The Law of the Land

By | August 11, 2016

When the opening ceremony of the Olympics in Rio highlighted climate change, it wasn’t hard to imagine the buzz – positive and negative – that would be generated.

The show included references to rising sea levels, and an animated GIF showing Earth’s average temperature anomalies back to 1850. The GIF ruled Twitter for a time in May. Insurance Journal reported on the animation as well.

In the ensuing days after the opening ceremony the news headlines and the stories below them that began popping up all over were fun reads to say the least.

There were those from populist news sites like Huffington Post: “The Rio Opening Ceremony Put Climate Change Front And Center.”

Others tried to encapsulate the full spectrum of the ceremony and the games, mentioning the climate change message, among other topics of global importance: “Rio Opening Ceremony Highlights Gisele Bundchen and Climate Change; Michael Phelps Leads Team USA.

Cosmo, too, referred to an oft-written about aspect of the opening ceremony – Giselle dancing! – in a story with the headline “People Are Angry that Climate Change Was Part of the Olympics Opening Ceremony.” The story offers tweets from viewers, most of whom didn’t like the climate change “propaganda,” plus a few brief words on something that Tom Brady’s supermodel wife evidently did that shook the world.

The Daily Mail seems to have no limit on the number of words one can use in a headline: “Brazil ignites the samba spirit! Rio Olympics is off with a bang but only after opening ceremony with empty seats, climate change lectures and ugly protests outside.”

Here’re a few more creative headlines:

First green, now gold: the climate changes in Rio,” from the Sydney Morning Herald; “17 People Who Were Super Mad About The Opening Ceremony’s Global Warming Video,” from Buzzfeed; and Death and Taxes Magazine, which obviously has a propensity for eye-catching names and headlines, gave us “Olympics opening ceremony left climate change deniers’ panties in a twist.”

Climate Change is Law of The Land

Bloomberg reported today that a federal appeals court has OK’d “an obscure regulatory practice that helps the U.S. government account for projected costs of climate change. ”

The decision followed White House guidance issued to federal agencies on how they can build carbon accounting into their decision-making.

The judges ruled that the U.S. Department of Energy acted reasonably in 2014 when it issued two rules promoting energy efficiency in commercial refrigerators. Multiple lawsuits against the agency ensued, and were eventually consolidated into one case – the one heard by the court.

The impact of the decision on the nation’s climate change policy is that “it allows the government to incorporate the social cost of carbon,” the story states.

The court backed the idea of affixing a social cost of carbon, the Obama administration’s estimate that puts the costs per metric ton of carbon dioxide emitted into the atmosphere at $36. It ruled that carbon costs can be estimated at the discretion of the DOE.

California Lawmakers

California’s Legislature is gearing up for its own climate change battle.

Negotiations over extending California’s climate change programs are ongoing as the state’s legislative session closes at month’s end, with lawmakers pushing for changes at the California Air Resources Board. A group of Assembly members want an audit of the board’s spending. This all comes on top of legislation aimed at increasing their authority over the agency and its spending formulas, according to a Times article.

Assembly Bill 197 would create a committee to review climate policies and force greater transparency upon the agency, but some environmental advocates believe the board has become a target for lawmakers looking for reasons not to vote to extend the climate programs, the article states.

“It’s very legitimate for legislators to do oversight of ARB and other agencies,” Bill Magavern, policy director for the Coalition for Clean Air, told the Times. “But some of what we’re seeing is more in the nature of political posturing and outright harassment of the agency.”

The Times also reported on Senate Bill 32, which would require greenhouse gas emissions to be 40 percent below 1990 levels by 2030. This is a “more aggressive set of mandates” than those set by the state’s landmark climate change law passed in 2006 with Assembly Bill 32, according to the article.

“Now there are legal questions over whether the state’s programs, including cap and trade, can continue past that deadline, leading to a scramble for new legislation,” the story states, referring to both to both bills. “The oil industry has opposed new regulations, and clean energy companies and environmental advocates face a difficult task of persuading business-friendly Democrats in the Assembly to back the measures.”

Insurance Subsidies And Climate Change

Insurance subsidies exacerbate climate change risks.

That comes from Washington, D.C.-based R Street, a typically conservative nonprofit public policy research organization that supports free markets, and a limited but effective government

However, responsible environmental stewardship is also part of the group’s mantra.

According to a policy short authored by R Street Texas Director Josiah Neeley, years of government involvement in property insurance markets have led to artificially low rates that mask the true risk of living in regions prone to dangerous weather.

“It cannot be ignored the extent to which government policy at both the state and federal level has encouraged people to live in flood-prone and storm-prone areas. Government subsidies have distorted market signals, leading many into a false sense of security about the risks they face,” the report states. “Artificially low rates provide signals that living in a specific location involves less risk than it actually does, leading more people to live and move to vulnerable areas.”

The report refers to data showing that 123 million people live in coastal counties, and it partly blames the National Flood Insurance Program for that.

The NFIP has “suppressed the creation of a private flood insurance market” with subsidies and outdated flood maps, according to the report.

The report also tees off on TWIA – the Texas Windstorm Insurance Association.

The state-created pool provides windstorm insurance for 14 coastal counties, and Harris County. Despite its stated goal of moving TWIA policyholders back into the private market, the pool has grown enormously over recent decades, the report notes.

“Originally intended to be an insurer of last resort for those who could not obtain windstorm insurance through the private market, TWIA has expanded rapidly,” the report states. “It has grown from approximately 50,000 policies in 2000 to about 275,000 policies today.”

To be fair TWIA has increased rates 5 percent each year from 2011 through 2016, a cumulative increase of 34 percent over the six-year period. And based on a 2016 actuarial analysis, TWIA rates would need to increase by roughly 24 percent overall in order to be actuarially adequate, according to TIWA’s website.

“Current TWIA rates are uniform throughout the 14 first tier coastal counties,” the site states. “Because rates do not vary based on any geographical factors, such as distance from the coast, rates may be actuarially adequate in some areas.”

TWIA has improved its financial position in recent years partly due to the rate increases, a lack of storm activity and voluntary depopulation programs. However, TWIA’s rates remain below actuarially sound levels, according to the report.

“Aside from these fiscal problems, subsidized flood and windstorm insurance programs raise serious environmental concerns,” the report states. “Subsidizing people to live in disaster-prone areas is wrong in fiscal, environmental and moral terms. To the extent lawmakers recognize climate change and sea-level rise as real problems, they need to stop government action that exacerbates these risks and leads more people to put themselves in harm’s way.”

Ly Short, social media manager at Wells Media Group, and Insurance Journal Southcentral Editor Stephanie K. Jones contributed to this report

Past columns:

R Street Short Paper

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