Insurers claim global warming makes some regions too hot to handle

Scientific American: In the wake of skyrocketing insurance claims due to natural disasters—hurricanes, wildfires, droughts, blizzards and the like—insurers have been imposing steep rate hikes and, in some cases, fleeing high-risk areas, leaving consumers out in the cold. It's gotten so out of hand, consumer advocates say, that insurers now are even crying climate change as a factor in raising premiums or dumping clients.

…Weather-related insurance losses rose to $50 billion in 2005 from less than $10 billion a decade earlier, according to a study by Ceres, a Boston-based nonprofit group that lobbies corporations to be environmentally responsible. The bulk of these losses can be attributed to sprawl in regions prone to catastrophe—the total area of coastal development in Florida has increased over 30 percent since 1990.

…Over the past year alone, insurance companies have dramatically raised homeowners' annual premiums in parts of Texas, Louisiana, the Carolinas, Massachusetts and New York State.…

Consumers are up in arms about these trends. "I think [insurance companies] are speculating on the fear of global warming and using it as an opportunity to raise rates," says Bill Newton, executive director of the Florida Consumer Action Network.…

"There's a continuum between public and private risk sharing, formally and informally. They play off one another and it's like a tug of rope almost," says Evan Mills, an environmental and energy systems scientist at Lawrence Berkeley National Laboratory in California.

…Florida, Texas, Louisiana and Massachusetts have followed the example of the federal government and started their own insurance operations. Florida's state-funded Citizens Property Insurance has underwritten more than 1.3 million policies since its start in 2002. Some states have also taken steps to minimize the losses of private insurers.

…To avoid price gouging, consumer advocate Newton and scientist Mills urge insurance companies to be transparent about the models they use for setting premiums—specifically how they factor in catastrophes believed to have been brought on by climate change. "We're looking at the global warming surcharge and asking them to back it up," Newton says. There are currently no state or federal laws requiring that companies provide this information.

…Mills stresses that there is a lot more going into premium increases than just new models that factor in climate change, including population increases along the coast, deterioration of infrastructure such as levies, and destruction of naturally protective wetlands. "Even if climate change wasn't happening," he says, "we'd be expecting insurance losses to be going up."

…Snyder says the long-term solution is to try to limit property damage by improving land use and enforcing building codes already on the books. In this respect, insurance companies have a role as advocates for preventive measures that decrease consumers', and, therefore, insurers' liability. (One of the ways insurers have accomplished this in the past, for instance, was to push for greater motor vehicle safety.) By this logic, a government spurred to action by citizens and private industry can enforce smart development rather than becoming an insurer.