Bringing Climate Science To Bear On Insurance (As Opposed To Reinsurance) Industry

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While reinsurance companies – which basically insure the insurers – have been studying increasing climate-related risks for decades, traditional insurance companies with familiar names like State Farm, Travelers and Liberty Mutual haven’t.

There are two primary reasons for this. The first is that they’ve been able to pass on the most catastrophic or uncertain risks to reinsurers and other investors. The second is that insurers are overconfident that they’ll be able to quickly adjust their policies on a year-to-year basis to manage climate risks. Hence a 2012 study found that only 12 percent of insurance companies had a comprehensive climate change strategy. This is starting to change. A 2018 study found that 38 percent of insurance companies now consider climate change to be a core business issue, a figure that will likely continue to grow.

In August of this year, the International Association of Insurance Supervisors, a respected international standard-setting body for the insurance sector, published a report outlining climate risk a strategic threat for the insurance sector. It cautioned against relying on annual adjustments to manage climate risks as physical risks can change suddenly and in “non-linear ways.”

Recognizing this threat, many insurers are throwing out decades of outdated weather actuarial data and hiring teams of in-house climatologists, computer scientists and statisticians to redesign their risk models.

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https://climatecrocks.com/2018/11/18/insurance-industry-vs-nature/#more-54457

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1. Actually I heard that State Farm has moved away from insuring property on the coasts. n/m