Global Warmers Recruit Insurance Industry

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The Article

Former Vice President Al Gore was scheduled to speak on global warming this coming weekend in New Orleans, but although Gore’s speech to the National Association of Insurance Commissioners had to be cancelled because of the devastation caused by Hurricane Katrina, his allies are pressing ahead with efforts to enlist the insurance industry in the global warming alarmist army.

Ceres, a coalition of environmental activists and left-leaning institutional investors, released a Sep. 8 report in preparation for the NAIC meeting claiming that “affordability and availability of insurance are already at risk from rising weather-related losses” and that “future financial exposure for insurers, state and federal governments, businesses and consumers could worsen if climate and business trends continue.”

The global warmers hope to lure insurance companies into supporting global warming regulation, such as mandatory greenhouse gas emissions reductions, on the basis that regulation may reduce the frequency and/or intensity of natural disasters and, consequently, their financial exposure resulting from policy claims. Insurance companies might also seek compensation for financial losses from energy, automobile and other industries blamed by environmentalists for global warming.

To the extent that the insurance industry is taking financial hits from Katrina and other natural disasters, however, the cause is more likely to be its own fault rather any alleged global warming.

As discussed in last week’s column, claims abound that Hurricane Katrina was somehow related to manmade global warming. A prominent hurricane/global warming researcher on this point — one frequently cited by global warming activists ?— is the Massachusetts Institute of Technology’s Kerry Emanuel who authored a seminal paper in 1987 claiming to link global warming with the intensification of hurricanes.

Who better, then, to rebut the notion that global warming represents a threat to the insurance industry?

In the wake of Katrina, Emanuel updated his position paper on global warming and hurricanes.

When asked in the paper’s Q&A section whether global warming is causing more hurricanes, Emanuel responded, “No.” The global annual frequency of hurricanes is about 90, plus or minus 10 and “there is no indication whatsoever of a long-term trend in this number,” Emanuel said.

Asked whether it would be “absurd to attribute the Katrina disaster to global warming,” Emanuel responded, “Yes, it would be absurd” — a response that stands in stark contrast to Robert F. Kennedy, Jr.’s recent attempt to use Emanuel’s research to link global warming with Katrina.

When asked whether “we are seeing more hurricane-caused damage in the U.S. and elsewhere,” Emanuel responded, “There is a huge upward trend in hurricane damage in the U.S., but all or almost all of this is due to increasing coastal population and building in hurricane-prone areas. When this increase in population and wealth is accounted for, there is no discernible trend left in the hurricane damage data.”

The absence of a “discernible trend” in hurricane damage is a “simple matter of statistics” according to Emanuel. “There are far too few hurricane landfalls to be able to discern any trend. Consider that up until Katrina, Hurricane Andrew was the costliest hurricane in U.S. history. But it occurred in an inactive year; there were only 7 hurricanes and tropical storms… it would take at least another 50 years to detect any long-term trend in U.S. landfalling hurricane statistics…,” he wrote.

The final question in the Q&A section is, “OK, maybe we won’t see global warming effects in landfalling hurricanes for another 50 years or so, but shouldn’t we still be worried about it?”

Emanuel’s response captures the essence of the insurance industry’s problem with natural disasters:

“The answer to this question is largely a matter of one’s geographical and time horizons. For U.S.-centric concerns over the next 30-50 years, by far the most important hurricane problem we face is demographic and political. Consider that Katrina, as horrible as it was, was by no means unprecedented, meteorologically speaking. More intense storms have struck the U.S. coastline long ago. The big problem is the headlong rush to tropical coastlines, coupled with federal and state policies that subsidize the risk incurred by coastal development. Private property insurance is heavily regulated by each state, and political pressure keeps rates low in high-risk regions like tropical coastlines, thus encouraging people to build flimsy structures there. (Those living in low-risk regions pay for this in artificially high premiums.) Federal flood insurance pays for storm surge damage, and like private insurance, its rates do not reflect the true risk. We are subsidizing risky behavior and should not be surprised at the result.”

In other words, the insurance industry ought to charge folks who live in risky places premiums that are commensurate with the local risks.

Maybe Al Gore’s prospects would be different if he made as much sense as Kerry Emanuel.

Steven Milloy
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