Insurance and Climate Change column

Professor Says Window to Prevent Dangerous Impacts from Climate Change Closing Fast

By | May 24, 2018

Costs from climate change-driven extreme weather events are on the rise, and the amount of time left to stop those impacts before they get progressively worse is rapidly closing, according to a Columbia University professor speaking on Tuesday during a webinar hosted by Climate Central.

Radley Horton, a Columbia University research professor, and a lead author for the Third National Climate Assessment, presented the hour-long webinar, “Climate Change and Extreme Weather.”

Horton summarized his findings in his studies of climate change as: “It’s real. It’s us. It’s serious.”

“The window of time to prevent widespread, dangerous impacts is closing fast,” Horton said.

Horton explained that while a few degrees warming doesn’t sound like much, the resulting impact will be noticeable.

“A small shift in average temperature could mean a huge change in the frequency and duration of extremes,” he said. “It’s not just the temperatures that are going up. The entire planet is changing.”

More water vapor, warmer ocean temperatures, less sea ice, changing temperatures over land, and less snow cover, are among the changes the planet is experiencing.

And far more heat records than cold records are being broken, he added.

Horton looked at the roughly 1,800 weather stations recording temperatures from the period between 1950 and 2009. With 1-degree Fahrenheit of global warming on average by the early 2000s, the change to the climate was already pronounced, he said.

“We’d already reached a state where you had almost twice as many record-breaking high extremes as low extremes,” he said, adding that there is still veritably in the weather. “But a signal is emerging. We can’t any longer plan for the climate extremes of the past.”

Horton said that while a great deal of attention is being given to the potential impacts of climate change on the weather, such as more severe droughts, worse storms, and rising sea levels, that not enough attention has been given to the potential of the combined effects.

A potential sea level rise of 2 feet over the next century, even without adding changes in the severity storms, would more than triple the frequency of dangerous flooding along U.S. coastal areas, he said.

“That 2 feet of sea level rise represents a transformative change in frequency,” he said.

So the damaging one-in-100-year events that produce high water levels will be far less rare, according to him.

“You don’t need stronger storms to get that catastrophic flooding,” he said. “Events that were happening every 100 years before could be happening in the lifetime of a typical mortgage.”

Got it Covered?

A handful of insurance firms in Europe are showing “true leadership on climate change” by actively managing the financial risks it poses in capital markets, but nine-in-10 investment strategies in the sector fail to align with the goals of the global climate agreement hammered out in Paris, according to a new global ranking of the sector released today.

The report “Got it covered? Insurance in a changing climate,” by the Asset Owners Disclosure Project, part of responsible investment organization ShareAction, examines 80 of the world’s largest insurers with $15 trillion assets under management.

The report looked at insurer disclosures based on recommendations from the Task Force on Climate-related Financial Disclosures covering climate strategy, climate risk management and targets. It drew on publicly available information and private survey responses. The TCFD was set up by the G20’s Financial Stability Board to provide a framework to improve the ability to assess and price climate-related risk and opportunities.

Twenty-four of 80 insurers responded to the AODP survey, up from just three last year.

“Results show that the UK takes two of the top four spots in the climate leaders category,” a statement from AODP reads. “The top-rated insurance firms are AXA followed by Aviva, who received a AAA rating, and Allianz and Legal & General, who were awarded AA. Legal & General was also the most improved insurer in total, moving up eight rating bands from last year. Japanese firm Tokio Marine also shot up six rating bands to a BBB rating, having been rated D in 2017.”

There have been no shortage of reports out lately examining what insurers are doing with their assets in response to climate change.

California Insurance Commissioner Dave Jones announced earlier this month announced he ran a “stress test” on the state’s largest insurers. Insurers analyzed in Jones’ test have more than $500 billion in fossil fuel-related securities, issued by power and energy companies, $10.5 billion of which consists of investments in thermal coal enterprises, according to the analysis.

The AODP report’s key recommendations include:

  • Regulators must strengthen regulatory frameworks and mandatory requirements for climate-related disclosure.
  • Investors should prioritize engaging with the U.S. insurance sector to promote better disclosure and management of climate-related risks and opportunities
  • To meet the the goals of the Paris Agreement, insurers need to take a more comprehensive and bold stance on climate change.
  • To be fully compliant with the TCFD recommendations, insurers need bridge the gap identified in the report around metrics and targets.

Tragedy of Horizons

According to new research from the University of Waterloo, the insurance industry hasn’t considered in their practices a changing climate, which represents a “tragedy of the horizons” for the finance and insurance sector because the economic risk associated with its effects is beyond the time and spatial horizon of most organizations.

A study from university researchers took data from 178 insurers and found that most insurance companies assumed the risk to property from extreme weather is static and based their premiums on historical data.

However, as extreme weather events are increasing in severity, frequency, and unpredictability, insurers have not adjusted, according to the report, titled “Insurance and Climate Change Risk Management: Rescaling to Look Beyond the Horizon.”

“As extreme events become more frequent, insurers that ignore climate change will not put away enough money to cover their claims,” Jason Thistlethwaite, a climate change economist at the University of Waterloo, said in a statement. “To re-coup those losses, they’ll have to raise rates or pull coverage from high risk areas. When this shift happens, thousands of people will lose coverage or it will be unaffordable.”

Data from the National Association of Insurance Commissioners Climate Risk Disclosure Survey – thanks to the same survey we know that U.S. insurers are increasingly willing to disclose their risk management practices related to climate change – was analyzed to detect whether there is evidence of insurers adopting risk‐management practices consistent necessary to capture the scale of risk associated with the effects of climate change on the insurance industry.

The report isn’t entirely down on the insurance business. It compliments reinsurers for being better at adapting to climate change-related financial risk, although it noted that dynamic could lead to significant disruption in the industry.

“Some insurers are better at understanding climate change than others,” Thistlethwaite said. “These organizations will survive, and likely be able to sell climate services to their counterparts struggling to understand the problem. Those that don’t, will fail. Insurers are supposed to watch our backs by looking into the future and protect us from unexpected events. We pay to not worry about these things.”

NASA Head

NASA’s new top guy doesn’t doubt that climate change is manmade.

Jim Bridenstine, President Trump’s newly installed NASA chief, said this week that he now believes human activity is the main cause of climate change.

He was speaking at a recent hearing of the Senate Appropriations Committee and stated that his views on climate change have changed from his previous position, which was that it is unclear how much humans contribute to climate change.

“The National Climate Assessment that includes NASA, and it includes the Department of Energy and it includes NOAA, has clearly stated it is extremely likely — is the language they use — that human activity is the dominant cause of global warming,” he was quoted as saying by The Hill in an answer to a question from Sen. Brian Schatz, D-Hawaii. “I have no reason to doubt the science that comes from that.”

A little over a year ago, Bridenstine said that he accepted that humans were a cause of climate change, but he wouldn’t say that they were the primary cause.

This is a bit of a departure for a Trump appointment list that includes a few that some would call climate science skeptics, such as Scott Pruitt as head the Environmental Protection Agency, Rick Perry as head of the Department of Energy and Kathleen Hartnett as head of the Council on Environmental Quality.

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