The insurance industry — an industry built on its ability to assess risk — is worried it is unable to accurately capture the costs incurred by climate change, industry experts told the Senate Budget Committee earlier this week. “Just as the U.S. economy was overexposed to mortgage risk in 2008, the economy today is over exposed to climate risk,” Aon PLC President Eric Andersen said.
The industry’s inability to predict losses is leading firms to pull out of high-risk areas, especially those frequently hit by wildfires and floods. This is, in turn, driving an increase in state-run insurance plans-of-last-resort for homeowners and other policyholders unable to buy insurance in the private market, which could in turn threaten private insurers if state insurers are pushed to insolvency by massive disasters.
Florida’s state-run insurer has warned its coffers were “significantly depleted” by Hurricane Ian and Milliman actuary Nancy Watkins warned the committee “the California FAIR plan is growing unsustainably high.” Near the end of the two-hour hearing, Sen. Sheldon Whitehouse (D-RI) presented Republican witness Dr. Judith Curry with a series of questions about her past climate contrarianism, including a now-deleted blog post in which Curry wrote that climate change “propaganda” from the UN “arguably qualifies as a hoax.” (E&E $)