Insurers cool on global weather

By Terence Corcoran
Copyright 1998 Globe and Mail (Toronto, Canada)
May 5, 1998

THROUGH much of this decade, the world's insurance industry has been fanning the fires of global warming. At the extreme, some of the largest firms in the business have sounded like Greenpeace campaigners bent on spooking governments into taking drastic action. Proffering statistics that appeared to show a dramatic increase in floods and storms, along with evidence of massive insurance losses, the industry mounted a major effort in support of the United Nations' greenhouse gas control program.

New numbers suggest the campaign was based mostly on hot air, although the early warnings appeared ominous. Climate change "could bankrupt the industry," said Franklin Nutter, president of the Reinsurance Association of America. Gerhard Berz, head of Munich Reinsurance's geoscience research group and one of the industry's leading climate hawks, said he feared climate change "will lead to natural disasters of unprecedented severity and frequency . . . so somebody better do something."

The industry's war on fossil fuels peaked in July, 1996, when 57 firms signed a United Nations Position Statement on Climate Change. It was a slippery document that hyped the global warming scare, downgraded market forces and pushed for "political initiatives." Man-made climate change "will lead to shifts in atmospheric and oceanic circulation patterns. This will probably increase the likelihood of extreme weather events in certain areas. Such effects carry the risk of dramatically increasing property damage, with serious implications for property insurers and reinsurers." To prevent that risk, the statement invoked the treacherous precautionary principle (there's no proof, but let's do something anyway to be on the safe side) and called on the world's governments to "achieve early, substantial reductions in greenhouse gas emissions."

Greenpeace was never far from the insurance industry initiative. Greenpeace International's climate change director, Jeremy Leggett, played a major role co-ordinating industry thinking and disseminating apocalyptic scenarios. Mr. Leggett, whose main objective is a world covered with solar power panels, wrote a 1993 Greenpeace report called Climate Change and the Insurance Industry that foretold of insurance disasters as the world's climate warmed. The report was widely endorsed by insurance industry officials. "Greenpeace makes a good case," Mr. Nutter said.

The latest figures, however, throw cold water on the industry's alarmist forecasts. Insurance industry losses from natural disasters have plunged over the past couple of years, according to Swiss Reinsurance. After peaking at $26.3-billion (U.S.) in 1992 -- the year of Hurricane Andrew -- losses from natural catastrophes fell back to $4.1-billion in 1997, a level that's not out of line with recent history. Swiss Reinsurance commented, moreover, that there is "no evidence of the influence of climate change. To date, there is no general scientific evidence of any significant change in the frequency of events."

The spikes in the early 1990s were caused by an unpredictable number of high-cost weather and earthquake events that the insurance industry was simply not prepared for. But even Swiss Reinsurance said these events do not amount to a trend. "The observation period of 20 years is much too short to make any conclusive statements, given the extremely volatile claims burden and the big impact that single events exert."

It is now also clear that a dramatic increase in natural disasters reported over the past decade may be a statistical development rather than a weather development. The increase in the number of events over the past decade can be explained by increased reporting in the media of storms and floods, greater population densities, industrialization and other factors unrelated to climate. As the chart shows, the number of man-made disasters -- fires, plane crashes and shipping mishaps -- increased at about the same rate during the same period. That suggests a change in the climate for collecting information, rather than climate change.

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