The insurance sector is already suffering because of a warming atmosphere and its associated ripple effects. But a new report suggests that the worst is yet to come, as insurers still don't comprehend the true "urgency of the crisis," Forbes wrote.
What's happening?
The rapid acceleration of global temperatures due to human-caused air pollution is well documented, and one of the many areas that have seen massive impacts is weather. With increasingly severe weather causing everything from heat waves to hurricanes, droughts, and storm surges, the damage has been tremendous.
In fact, according to Forbes, human-caused climate change has been behind one-third of weather-related insurance claims in the 21st century.
But while those losses had been estimated at approximately $600 billion, a new analysis from nonprofit network Insure Our Future found that the actual number may be closer to $720 billion — with nearly $52 billion occurring in 2023 alone.
"The impact of climate change is not just a present and future problem," Ilan Noy, a Victoria University of Wellington researcher, told Forbes. "It has already been driving up risks and causing major losses throughout this century."
Why is this so concerning?
What worries scientists is that the industry has yet to adapt to this new reality — or work to change it. Insure Our Future reported that, while 28 of the world's major insurers lost a collective $10.6 billion because of climate-related losses in 2023, they simultaneously invested $11.3 billion into underwriting corporate fossil fuel clients.
This, many argue, is the same as encouraging the generation of more planet-heating air pollution, and it's not going to work out well for anybody involved.
The "true costs and risks of the climate crisis" are going to "overwhelm insurers and economies," Noy warned.
"Because insurance impacts are mounting and because we don't have an insurance system built for the way that climate change is evolving, this dynamic is only going to get much worse," Laurie Laybourn, with Strategic Climate Risks Initiative, told Forbes. She called the current understanding "a fundamental misunderstanding of causality."
🗣️ When was the last time you weatherized your home?
🔘 This year 👍
🔘 Last year 🕜
🔘 More than two years ago 📅
🔘 Never 🤷
🗳️ Click your choice to see results and speak your mind
What's being done to prevent further losses?
The new report suggested seven specific actions that could "safeguard communities and to ensure a future for the insurance sector."
They include integrating true climate cost into actuarial models, mandating data transparency, developing — and adhering to — transition plans to reduce emissions, and taking steps to ensure that the corporations and governments causing the harm are the ones paying for it instead of the innocents.
Forbes cited the report, which stated that the insurance industry "must embrace its power and accelerate the transition to clean energy, stop underwriting new fossil fuel projects, and rapidly align with credible 1.5 degrees Celsius transition pathways."
Join our free newsletter for good news and useful tips, and don't miss this cool list of easy ways to help yourself while helping the planet.
Cool Picks
