John Morrison, the state auditor of Montana and Alex Sink, the chief financial officer of Florida have written an article that was published last week in the Washington Post, linking the current wildfires in Montana to climate changes. The incidence of wildfires is now four times higher than in the 1980s.  Spring now arrives earlier and summers have become hotter and drier. The number of wildfires last year set a new record, and insurance companies pay billions to cover wildfire losses throughout the western U.S. 

Morrison and Sink also point out insurers have also paid tens of billions of dollars for damages from hurricanes that have become more intense. Florida was hit by eight hurricanes in 2004 and 2005, and the number of storms reaching Category 4 or 5 has increased by nearly 100 percent since the 1970s. From 1980 through 2005 increasingly severe weather -- including heat waves, hurricanes, typhoons, floods, wildfires and hailstorm accounted for 88 percent of all property losses covered by insurers, and seven of the 10 most costly disasters for the U.S. property/casualty industry occurred between 2001 and 2005. 

Peter Levene, chairman of Lloyds of London, who formerly questioned theories about global warming, now believes that carbon emissions from human activities are causing higher global temperatures and increasingly severe weather. In a March speech, Levene noted that Lloyds is directly affected by extreme weather since it has to pay for losses. Lloyds predicts a future hurricane that will cause $100 billion in damages in the U.S., more than twice the devastation that resulted from Hurricane Katrina. Industry analysts estimate that a storm of that magnitude would bankrupt as many as 40 insurers. The Association of British Insurers is urging governments to reduce carbon emissions. In the U.S. AIG, the largest insurer, Marsh, the leading broker, and other industry members are calling on Congress to take actions to reduce greenhouse gas emissions by 60 to 80 percent by 2050.

The Climate Change Peril That Insurers See (Washington Post 9/27/07)

October 2, 2007