Climate Change & Insurance: Threat or Opportunity?

Brett Schreiber

Marketing

Fisher College of Business

Global Warming Determination

Intergovernmental Panel on Climate Change (IPCC) is made up of thousands of scientists that come up with a defined statement on climate change

5 assesments have been made with the last assessment being in September of 2013

http://www.youtube.com/watch?v=rFYbdHW7QAM

Highlights from IPCC AR5

95% sure the climate change is manmade

Increase from 90% in 2007 and 66% in 2001

“The pause”- .22 deg F increase per decade since 1950 while this has leveled off to .09 deg F since 1998

Conflict: models are not reproducing warming of last 15 yearsEl Nino/La Nina

Human Impact on Climate Change

Differences in land cover

Release or cleanse of pollutants

Release or cleanse of greenhouse gases

What Insurance Companies Think of the Climate Change

There has been almost unanimous agreement that the climate is changing

Mainly worry about increasingly severe weather events and global warming

More severe natural disaster makes for more cost in damages. Ex: 12.3 billion dollars going to corn farmers that

suffered from last years drought

Pricing Response

With increased severity of these weather events, potential losses are inevitable

Talks of risk adequate pricing and less availiability in high risk areas

Risk Management Response

Loss prevention is thought of as a more reasonable approach

By limiting the amount of on-site fuel accumulation, changing roofing materials, clearing brush around the buildings and even by not using a lot of oil-based plants in the landscaping, “we can manage the liability so we can still put our capacity out there even in high-risk zones.”  -Zurich Insurance

Opportunity

A more climate threatened world gives insurance companies the ability to increase revenue through covering other emerging business that is trying to solve the problem

Most seen in alternative energy

Some governments encourage alternative energy with incentivesEx: Germany and solar power

Risk of renewable energy is that they may not be operational in some nature conditions.

Review

IPCC determined 95% of climate change is human caused

The increase in temp. has leveled off but thought to be due to El Nino/La Nina

Major Human impact on climate includes altering land cover, pollutants, and GHGs

Climate change does provide difficulties for insurance companies, but also gives opportunities through renewable resources and risk management

Sources

http://www.propertycasualty360.com/2013/02/05/climate-change-insurance-existential-threator-ex?t=climate-change&page=

http://ecoopportunity.net/2013/03/climate-change-and-insurance-a-looming-threat-to-the-economy

http://www.ipcc.ch

Questions?