With extreme weather patterns and rising tides threatening properties around the world, insurers have taken on climate change with renewed vigor.
Are insurance companies the new eco-warriors? At first glance, environmental activism and insurance might seem like a strange pair, but it actually makes a good deal of sense: with the ongoing and frequent instances of extreme storms, rising tides, and other natural disasters, insurers are left to deal with the brutal — and expensive — consequences of global warming.
The Cost of Climate Change
The frequency and severity of hurricanes, tornados, and droughts have risen sharply along with average temperatures around the globe. Not only are these events devastating, they are also incredibly expensive. MarketWatch explains how, in 2011 alone, the United States endured a record-breaking $400 billion loss in weather-related damages and suffered insured losses of $119 billion.
In 2012, Hurricane Sandy left $20 billion in damages in its wake. The severity of the storms themselves has also increased due to climate change; according to Karen Clark & Co, a risk-assessment consultant, top hurricane wind speeds are predicted to rise by 5%, which could incur up to 40% in additional property insurance losses, as TriplePundit reports.
Insurance and Rising Temperatures
Meanwhile, the rise in the mercury doesn’t seem to be relenting — experts predict that 2016 will be the hottest year on record, according to Bloomberg.
Clearly, immediate action has become necessary. Property insurance companies — who bear the brunt of the expenses — have been advocating for more environmental awareness and responsibility. Rather than reacting with emergency measures in the wake of severe natural disasters, it is far cheaper to invest in preventative measures that aim to slow climate change, and therefore eventually curb the amount of damage incurred in the first place.
In Europe, the insurance industry has launched a campaign to increase awareness around climate change. The initiative, called Target Two Degrees, seeks to limit the increase in temperature to 2 degrees centigrade, the amount called for by the UN Framework Commission on Climate Change, as the Spiegel reports.
The public is encouraged to pledge their support by signing up online and posting pictures of themselves holding pledge cards that can be downloaded from the campaign’s website.
In other instances, insurance companies have taken proactive steps beyond just raising awareness. Companies such as Aviva PLC have pledged to take account of “carbon risk” in their investment decisions, while French company AXA and the German Allianz have both divested from fossil fuels in a bid to slow the creeping rise of temperatures, according to the Guardian.
What’s in Store for the Future
Individual insurance companies may play a huge role in ushering in a new era of environmental awareness by making low-carbon and eco-conscious options the new normal. For consumers, incentives such as lower premiums for those who drive a hybrid vehicle or own a green-certified house sweeten the deal.
For instance, in Los Angeles, Farmer’s Insurance has introduced a program called “Eco-Rebuild” that replaces damaged properties with more eco-friendly materials, according to Bankrate.
Ultimately, as the exorbitant price of climate change is made ever more apparent, insurance companies are poised to be at the vanguard of new initiatives developed to combat — or at least abate — the ravages of global warming. In a very real sense, insurance companies, along with policy changes and government initiatives, could be a pivotal force in slowing down the rapid rise of global temperatures.
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