Insurance industry applying its own carbon tax

New York City saw billions of dollars in flood-related damages from Hurricane Sandy (Michael Bocchieri/Getty Images)
New York City saw billions in flood damages from Hurricane Sandy (Michael Bocchieri/Getty Images)

The actuarial sciences of the insurance industry have identified an implacable reality and placed a tax on carbon emissions. For anyone who wants insurance, payment is unavoidable. Protesting or complaining won’t change an insurance industry that functions with the cold logic of calculated risk — if risk increases, premiums increase. And this explains their carbon tax. The industry doesn’t need measured rises in atmospheric levels of carbon dioxide or higher global average temperatures to understand what is happening to weather. All it needs is the cost of claims.

In the relative microcosm of Vancouver Island, for example, claims related to fire and lightning caused by weather jumped from levels of about $1.2 million per year in 2010 and 2011 to $6.5 million in 2012. Corresponding claims for wind damage rose from about $250,000 per year to $2.9 million. Total claims for 2012 were $15 million, equal to the sum of the previous two years — with almost all the increases related to weather. Consequently, the annual premiums for the usual package of house insurance commonly rose by a hundred dollars or more.

Across Canada, the situation is similar. “There are more and more storms happening,” said Pete Karageorgos of the Insurance Bureau of Canada, “and we’re seeing extreme weather events that happened once every 40 years… that can now be expected to happen once every six years”. Consequently, “the amount of claims that have been presented has been averaging about a billion dollars [more] a year over the last three years or so”.

Extreme weather costs grow six-fold in six years

Extreme weather events that cost Canada less than $200 million in 2006, reached $1.2 billion in 2012. Domestic fires, which were once the principal cause of insurance payouts, have been replaced by flooding, the result of engineered drainage systems being overcome by torrential rainfall. Wind damage from powerful storms has move up to the second highest cause of claims.

“It’s just been five horrendous years in a row,” confessed Glenn McGillivray, managing director of the Institute for Catastrophic Loss Reduction. Just two events in the last year — June’s flooding in Alberta and July’s torrential rainfall in Toronto — brought the insured property damage to $3 billion. The costs to insurance companies of the devastating ice storm that hit Toronto and parts of Ontario, Quebec and the Atlantic Provinces during the last days of 2013, have yet to be calculated — the uninsured costs may never be known. One of the largest insurers of property in Canada, Intact Financial Corporation, raised premiums by 15 to 20 percent as a result of heavy losses from climate-related claims. Some home owners are simply denied coverage if they live in areas newly identified as prone to flooding.

Hurricane Sandy a wake-up call

In the United States in 2012, the arrival of Hurricane Sandy caused $65 billion in destruction to the US Atlantic coast — happily for the insurance companies, less than half was insured. The storm, however, has forced some property owners in New York and New Jersey to confront the options of moving away from shorelines, elevating their homes, or paying flood insurance premiums of as much as $31,000 a year (Associated Press, January 29/13). The same year’s drought in the US Midwest did $20 billion in crop damage, of which $17 billion was insured.

Outside Canada and the United States, the indications of extreme weather are repeated — except the numbers are correspondingly larger. Munich Re, one of the world’s largest re-insurance companies, has been using the best meteorologists, hydrologists, geologists and geophysicists available to understand and predict the increasing number of extreme weather events it has been noting since the 1970s, well before climate change became a term of common usage. Their insurance rates are rising as their actuarial studies reveal a clear indication of increasing risk from extreme weather.

Extreme heat making waves too

Material damage, however, is just the surface of the problem for the insurance industry. Because it will insure everything from homes and crops to product delivery and sporting events, anything that creates uncertainty adds to risk and affects insurance rates. So heat waves that are now predicted to occur every two or three years in the US Midwest and central Europe, according to Munich Re’s research, mean that premiums for insuring anything remotely related — from soybean crops to shipping schedules — will have to rise accordingly. Because Southeast Asia is expected to experience the same heat events, except every one or two years, the complicating effects must be anticipated as more expensive insurance.

Droughts are particularly insidious — such as the 2011 one in Somalia — because they are usually persistent, with consequences that can be both devastating and widespread. As Josette Sheeran of the World Food Program noted, victims have three options: they can riot, migrate, or die. Regardless, they throw social, political and economic stability of local, adjoining and distant countries into turmoil — climate refugees, for example, send waves of disturbances around the world. The successive droughts in Russia in 2010 and 2011 caused a global grain shortage that threw international food prices into pandemonium, and have been connected to the Arab uprisings that are still echoing throughout the Middle East. These unanticipated conditions are precisely the unknowns that insurers can only address by increasing the price of premiums.

As weather becomes more extreme and unpredictable, the whole system of payment for risk becomes more expensive. Every claim that is paid by the insurance industry is recorded somewhere in a Great Actuarial Ledger to become additional costs forwarded to future policy holders — most of whom do not realize that these increased premiums are actually carbon taxes.


About Ray Grigg

Ray Grigg is in his ninth year as a weekly environmental columnist for the Campbell River Courier-Islander on BC's Vancouver Island. Before this column, titled Shades of Green - now appearing on as well - Ray wrote a bi-weekly environmental column for five years. He is the author of seven internationally published books on Oriental philosophy, specifically Zen and Taoism. His academic background is in English literature, psychology, cultural history, and philosophy. He has travelled to some 45 countries around the globe.

12 thoughts on “Insurance industry applying its own carbon tax

  1. How clever of CRU to destroy the raw data so it can’t be checked: Unflippingbelievable!

    ” SCIENTISTS at the University of East Anglia (UEA) have admitted throwing away much of the raw temperature data on which their predictions of global warming are based.

    It means that other academics are not able to check basic calculations said to show a long-term rise in temperature over the past 150 years.

    The UEA’s Climatic Research Unit (CRU) was forced to reveal the loss following requests for the data under Freedom of Information legislation.

    The data were gathered from weather stations around the world and then adjusted to take account of variables in the way they were collected. The revised figures were kept, but the originals — stored on paper and magnetic tape — were dumped to save space when the CRU moved to a new building.

    ” In a statement on its website, the CRU said: “We do not hold the original raw data but only the value-added (quality controlled and homogenised) data.”

    The CRU is the world’s leading centre for reconstructing past climate and temperatures. Climate change sceptics have long been keen to examine exactly how its data were compiled. That is now impossible”.

  2. It really is time to stop the nonsense, when “One of the Met Office’s most senior experts yesterday made a dramatic intervention in the climate change debate by insisting there is no link between the storms that have battered Britain and global warming.

    Mat Collins, a Professor in climate systems at Exeter University, said the storms have been driven by the jet stream – the high-speed current of air that girdles the globe – which has been ‘stuck’ further south than usual.

    Professor Collins told The Mail on Sunday: ‘There is no evidence that global warming can cause the jet stream to get stuck in the way it has this winter. If this is due to climate change, it is outside our knowledge.’

    His statement carries particular significance because he is an internationally acknowledged expert on climate computer models and forecasts, and his university post is jointly funded by the Met Office.

    Prof Collins is also a senior adviser – a ‘co-ordinating lead author’ – for the United Nations Intergovernmental Panel on Climate Change (IPCC). His statement appears to contradict Met Office chief scientist Dame Julia Slingo.

    Last weekend, she said ‘all the evidence suggests that climate change has a role to play’ in the storms.

    Prof Collins made clear that he believes it is likely global warming could lead to higher rainfall totals, because a warmer atmosphere can hold more water. But he said this has nothing to do with the storm conveyor belt.

    He said that when the IPCC was compiling its Fifth Assessment Report on climate change last year, it discussed whether warming might affect the jet stream. But, he went on, ‘there was very low confidence that climate change has any effect on the jet stream getting stuck’. In the end, the possibility was not even mentioned in the report.”

    Read more:

  3. The insurance industry is just trying another money grab.
    There has been no warming for 17+ in spite of supposedly high CO2 levels…although it is still measured in parts per million. We’ve had some recent bad storms, but it has all happened before, so the situation is not unique. The insurance industry just doesn’t like anything that has risk. I had to drop earthquake insurance because the premiums have gone up too much.

    We are in a cooling period and there will be more storms, but…

    1. You use “C3” as a source – the well-known climate change denial blog? Junk science and zero credibility, which should be clear to even a casual reader.

      As for Lawrence Solomon … well, he is the author of “The Deniers: The world-renowned scientists who stood up against global warming hysteria, political persecution and fraud”. His bias is rather obvious.

      1. A few posts from Judy Cross, elsewhere on the interwebs – the place with no editing:

        November 21, 2013 – Warming stopped in 1998 and I just wish the money would stop flowing from American based foundations to the Climate Crazies so we can get ready for the prolonged cold which starts next year.

        February 13, 2014 – I begin to think that the people who push this nonsense are barking mad or just assume the rest of us are very, very stupid.

        November 24, 2013 – The man-made climate scam has been exposed numerous times on numerous grounds. Temperatures haven’t increased for 16 years, the science was phony and the institutions corrupt, yet the scam continues supported by shills like Ms May!

        November 7, 2013 – But since all CO2 does is help plants to grow, it is actually somewhat detrimental to try to limit its production.

        October 25, 2013 – Don’t let the fact that CO2 has absolutely no influence on climate bother you….just keep banging the drum for the greatest scam ever attempted.

        October 13, 2013 – It doesn’t matter how much CO2 we produce because it has no effect on climate, all it does is give a boost to plant growth. What’s not to like? The IPCC has been shown to be a totally corrupt political org. They aren’t doing science, they are doing scam!

        Among the “credible sources” quoted in her comments:


        Not to mention the always-objective “Daily Mail” (as in “Miley Cyrus Hooked on Drugs Delivered by Satan and Prince William!!”). lol!

        1. C3 is a perfectly valid source. Because you climate crazies don’t approve means it’s a valid source for real information.

          “Climate Denier” is a really stupid phrase, since there is no denial that climate DOES change among skeptics.

          What is denied is that CO2 has enough effect to do anything to weather or climate. At less than 400ppm or 4/100 of 1%, there is too little of it to make a traceable difference.

          The real “Climate Denialists” are those who deny NATURAL CLIMATE CHANGE.

          1. Judith Cross says: “Because you climate crazies don’t approve means it’s a valid source for real information.”

            Which means, I suppose, that climate denial crazies can be rejected as a “valid source for real information.”

            Can’t have it both ways, Judith Cross.

        1. No responsible, intelligent adult will regard “whatsupwiththat” as anything more than a ridiculously childish commentary.

          To believe otherwise is just sad. Completely ignorant of fact, and sad.

          “Pollution Grows Plants!”
          “God Loves CO2!”
          “Gasp for God!”

          What a childish and mind-warped person you are.

          1. Sticks and stones…but facts will triumph in the end, DavidH

            Educate yourself

            Posted on February 17, 2014 by Anthony Watts

            Guest essay by Donald C. Morton

            Herzberg Program in Astronomy and Astrophysics, National Research Council of Canada


            The Report of the Intergovernmental Panel on Climate Change released in September 2013 continues the pattern of previous ones raising alarm about a warming earth due to anthropogenic greenhouse gases. This paper identifies six problems with this conclusion – the mismatch of the model predictions with the temperature observations, the assumption of positive feedback, possible solar effects, the use of a global temperature, chaos in climate, and the rejection of any skepticism.


            1. 1. Donald C. Morton is an astrophysicist. If you’re not sure what that means, look it up (and astronomy as well). He is not n expert in the field.

              2. The website you quote continues to carry crap that has been completely discredited by worldwide bodies and independent government/academic inquiries … including the “hockey stick” nonsense and the childish “Climategate Emails” internet myth. You might as well defend UFO and Sasquatch sightings.

              (PS – Obama is Kenyan, 911 was an inside job, vaccines kill people, tinfoil hats prevent dangerous radiation from cell phone towers … and so on.)

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