Insurance companies expect extreme weather events like hurricanes, droughts and floods to increase in frequency and cost, some insurers said Friday, following the release of a United Nations panel report that links some extreme weather events to climate change.
Climate change is leading to some cases of more extreme weather events around the world, according to the report, by the Intergovernmental Panel on Climate Change. The report concluded that total rainfall from heavy winds will likely increase across the 21st Century and that daily temperatures have increased on a global scale amid rising greenhouse gas emissions, although it acknowledged the scientific link between climate change and extreme weather is not uniformly clear.
Insurance companies are seeing the link and weather-related premiums are rising as a result of a rise in extreme-weather events and escalating costs to fix the damage, some insurance companies say.
"The insurance sector is heavily exposed to climate change due to severe losses from extreme-weather events," Mark Way, a senior vice president at reinsurance firm Swiss Re AG said during a conference call with reporters.
In the U.S., high-cost weather events have increased by a factor of five over the last 30 to 40 years, Way said. While the huge jump is based in part on the devastation that resulted from Hurricanes Katrina and Rita in 2005, the U.S. has experienced other losses, he said. In 2011, the U.S. experienced five extreme-weather events that each resulted in more than $1 billion in damage, he said.
The U.N. report on extreme weather and climate change comes 10 days before government officials from around the world are scheduled to meet in Durban, South Africa, for international climate talks. An ongoing disagreement between rich and poor countries over what role each should play in fighting global climate change, and a stalemate between China and the U.S., have been widely expected to continue at the talks in South Africa.
Meanwhile, U.S. farmers have seen rising costs due to more frequent extreme- weather events, said David Friedberg, founder and chief executive of The Climate Corp., which sells extreme-weather insurance to farmers.
Mindy Lubber, president of activist investor group Ceres, said this year's drought and wildfires in the U.S. Southwest resulted in more than $9 billion of damage, while Hurricane Irene, which killed 45 people, caused flooding and widespread power outages that caused more than $7 billion in damage.
Lubber said the rising costs of damage from extreme weather events "are being driven to all parts of our economy," leading to higher prices for energy, insurance and other products.