Thursday, April 20, 2006

Climate change and the insurer's bottom line

Here's an interview with a DOE scientist who has studies the impact of climate change on the insurance industry: The insurance industry prepares for climate change

I would say that insurers are better equipped to understand and evaluate the science than most other industries, and they have no particular vested interest in propping up polluting industries. To the contrary, pollution liability is one of the emerging (often insured) risks that keep them up at night. They are also more vulnerable to the impacts; they can’t afford to overlook or be wrong about the science. Insurers who have looked at the climate-change issue closely see more burdensome economic costs from inaction than from prudent action, and, in fact, they are developing business opportunities associated with climate-change mitigation and adaptation solutions. They are also quick to recognize that investments in reducing greenhouse-gas emissions can be highly cost-effective in terms of reduced energy expenditures.
The article is rather dry on the whole, but it does get at a favorite theme of mine—that the actuaries in the insurance industry have just as valid a voice in the policy debate about climate change as the scientists do. The scientists will observe, probe, understand, and predict. The actuaries are left to boil it down to setting the odds and tabulating the dollars and cents impacts.

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