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article imageWith climate change going unchecked, insurance costs will rise

By Karen Graham     Nov 20, 2018 in Business
Although there are some folks who remain skeptical of Climate Change, the folks who make a living providing us with insurance are not. Insurance companies are already being impacted by the significant amount of destruction a warming world is causing.
Between the devastating wildfires in California and the destructive forces of Hurricanes Florence and Michael on the East Coast earlier this fall, the property/casualty (P/C) insurance market has been tested.
While some insurers have been up to the challenge, other firms have struggled to fulfill their obligations to home and business owners impacted by the storms or wildfires. This is particularly evident in the home insurance market that still relies on heavy regional concentrations.
As an example, State Farm, Farmers and AAA have the largest risk exposure in the California home market and are thus most likely to face direct impacts from the Camp and Woolsey wildfires, reports the Insurance Journal.
Damage caused by Hurricane Michael in Panama City  Florida
Damage caused by Hurricane Michael in Panama City, Florida
Brendan Smialowski, AFP
Catastrophic loss claims are moments of truth for P/C insurance customers. Over the years, insurance companies who proved to fulfill their clients' needs, especially in the face of catastrophic losses, ended up winners or losers depending on how well they treated their customers when their services were needed most.
Rising insurance costs or an 'uninsurable world'
The list of catastrophic weather events is growing: hurricanes, flooding, wildfires, mudslides, drought, heat waves and insurance costs related to health risks caused by a changing climate.
Washington National Guard members join rescue workers from the Everett Fire Dept. to clear the debri...
Washington National Guard members join rescue workers from the Everett Fire Dept. to clear the debris field from last month's massive mudslide near Oso that killed dozens.
Staff Sgt. Rory Featherston
Five of California’s most destructive wildfires on record occurred in 2017. In fact, 2017 is the costliest year on record for insurers with total U.S. wildfire peril totaling $16 billion in losses. The full damage in California is estimated to be as high as $180 billion in costs stemming from fire suppression to insurance and recovery expenditures, according to the Allianz California Wildfire Review.
"The insurance industry will be unable to operate effectively if the current trajectory of climate change proves accurate," says Insurance Australia Group (IAG) Executive Jacki Johnson, reports the Financial Review.
Johnson's comments come after the UN Environment’s Finance Initiative (UNEP FI) announced a partnership with a group of 16 large, global insurers and reinsurers whose mission is to develop a new generation of risk assessment tools for insurance companies.
Chris and Nancy Brown embrace while looking over the remains of their burned residence after the Cam...
Chris and Nancy Brown embrace while looking over the remains of their burned residence after the Camp fire tore through Paradise, California
Josh Edelson, AFP
Johnson adds that our failure to reduce greenhouse gas emissions could result in a world that is “pretty much uninsurable”, an outcome that would hit poorer regions hardest.
UN Environment Chief Erik Solheim voiced a similar concern, stating that an uninsurable world is a “price that society could not afford.”
“This is why UN Environment is working with leading insurers to understand and reduce risk, to seize unprecedented business opportunities in climate action, and to ensure an insurable, resilient and sustainable world,” added Solheim
More about Climate change, Insurance, Affordable, home owners, California