By James J. Wrynn and Patrick B. Omilian, Attorneys, Goldberg Segalla LLP
Are insurers prepared for climate change? A recent report says no, making major news in the insurance industry, and drawing attention to the economic impacts of global warming. Changing weather patterns, increased intensity and frequency of catastrophic events, and the unpredictability of risks associated with the warming of the global climate create major challenges for the industry. Consider that in 2011, natural disasters exerted the costliest toll in recorded history, with more than $380 billion in losses resulting from earthquakes, floods, tornadoes, hurricanes, wildfires, tsunamis, and more. Only one-third of these losses were insured.
Without question, climate change presents a spectrum of challenges for insurers to realize positive social and financial impacts by creating, offering, and encouraging new products, services, investments, and risk-spreading mechanisms. Although some industry responses, such as higher premiums and reduced coverages, are regressive in nature, many industry developments have been positive, including new innovations in products and services, encouraging the “greening” of corporate ethics, fostering climate research, and engaging in public policy. These responses illustrate how the insurance industry is yielding positive benefits, both financial and social, from the challenges and opportunities presented by global climate change.
This commentary examines recent impacts of global warming on the insurance industry, the financial challenges encountered in the changing climate of insurance brought by global warming, how the insurance industry is responding to the challenges posed by global warming, and how the industry can confront the new risks that continue to arise.
James J. Wrynn is the former New York State Superintendent of Insurance and is a partner at Goldberg Segalla LLP, where he heads the firm’s insurance regulatory practice.
Patrick B. Omilian is an associate with Goldberg Segalla. Mr. Omilian earned a J.D./M.S. Environmental Sciences degree at Indiana University and a B.S. in Natural Resources from Cornell University. Both authors practice in Goldberg Segalla’s Global Insurance Services Practice Group.
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