Insurance companies grapple with climate change-fueled risks - Hawaiipublicradio
Insurance companies grapple with climate change-fueled risks | Hawai'i Public Radio
Insurance companies grapple with climate change-fueled risks
In a world of climate uncertainty, insurance companies are raising rates to cover risk and replacement costs.
Twenty years ago, the Mānoa Valley flood caused more than a million dollars in damages — and that storm was not a full-blown hurricane. To put it into context, Hurricane ʻIniki in 1992 cost $3 billion in damages and the Maui wildfires are estimated at twice that.
Back in 2010, J.P. Schmidt was the state's insurance commissioner, and he had just convinced an insurance company from Korea — Dongbu — to set up shop in Hawaiʻi. He also served as Maui County corporation counsel. He now has a firm, Abaris Global.
The Conversation reached out to him in Denver to get his take on things.
"Insurance companies have had to deal with much higher risks than they had anticipated. And a lot of that is due to global warming, climate change," he said.
He said that insurance companies are pulling out of places like Florida, California and Louisiana because they feel that they can't price their premiums high enough to recoup losses.
"They're all to some degree due to climate change creating new and more violent, more expensive risks. But then there are also local conditions, local laws in each state that are problematic for the insurance companies. And so in Hawaiʻi, we have to be aware of those difficulties and the difficulties that companies have with laws and requirements," Schmidt said.
Schmidt said so far, he hasn't seen the same thing happen in Hawaiʻi. But he said state officials need to be proactive.
The Conversation is planning a call-in show on this issue next week. Do you have an insurance story to share with us? Call our talkback line at 808-792-8217 and record something. Click here for other ways to send us a message.
This interview aired on on May 23, 2024. The Conversation airs weekdays at 11 a.m. on HPR-1.
Related Knowledge Center: Climate economics
Climate change is now a driver of the world’s economy. The impact is profound:
- Catastrophic weather events — hurricanes, floods, droughts, high temperatures — are more frequent and more extreme. The cost can be measured in both the initial damage caused and the longer-term impact on the economy.
- Vulnerable communities are increasing climate-related investments, hardening infrastructure and taking other protective measures.
- Investment in carbon capture and storage technologies is increasingly rapidly.
- Governments are making investments and crafting regulations to reduce emissions of carbon dioxide and other greenhouse gases.
On top of all of this is the cost of uncertainty. As the Fourth National Climate Assessment, released in 2018 by the U.S. Global Change Research Program, says, “The assumption that current and future climate conditions will resemble the recent past is no longer valid.”