In a world where many live in scarcity, one commodity is always in full supply. And, while there’s always plenty of blame to go around, we expect environmental blame to be in overdrive before 2020’s in the books.
The effects of climate change are becoming too frequent, too severe, too onerous a financial burden to many large and powerful institutions, for denial to be maintained.
The next ‘thousand-year-flood’ doesn’t care if it carries off the home of a climate denier or an environmentalist, and when the truth finally becomes personal, anticipate deniers howling for relief along with everyone else — and looking for someone to blame.
They may not find such a receptive audience, however. As Fortune succinctly framed it, “for the insurance industry, global warming has advanced from a future ecological challenge to a present financial shock.”
Reinsurance company Munich Re called 2017-18 the worst two-year period for natural catastrophes on record, with insured losses of $225bn.
The largest reinsurer in the world, Swiss Re, has taken in twice as much in premiums for disasters at it has paid out in claims over the past twenty years. Not bad, not bad at all. However, “for the past two years, Swiss Re has had to pay out vastly more for large natural catastrophes, those over $20 million apiece, than its models anticipated for an average year’s loss. In 2017, Swiss Re expected to incur $1.18 billion in large “nat-cat” losses, based on actuarial averages, but racked up a bill of $3.65 billion.” In 2019 hurricanes once again blew their projections out of the water – rain and floodwater in this case.
So insurers at least, have no doubts whatsoever about climate change. Their prime question is, how do we protect ourselves? They are, after all, masters of managing financial risk. So, what are their plans?
For one, as Fortune notes, some are pulling back from insuring carbon-dependent industries such as coal. In our last issue we noted that there were two tipping points: one for climate change, the other for the movement working to preserve our world as it was. We did not, however, consider adding ‘lack of insurance for carbon polluters’ to the scales. Hmmm.
One reason such companies are easing back from insuring Big Carbon? As Fortune continues,
“In January, the CRO Forum, a Netherlands-based organization of chief risk officers of big insurers, warned of new sorts of climate-related claims that may confront insurers. Among them: hefty bills from corporations they insure against lawsuits. At this point, legal action charging that big carbon emitters contributed to climate change or failed to react sufficiently to it is just beginning to emerge. But, as the insurance group noted ominously, the science of pinning climate blame on corporate polluters “is developing fast.” (Emphasis ours. -Ed.)
The oil industry, for example, whose documents prove they knew decades ago the effects their products were having on climate, may be in for a beating. We believe it will be in motion by late 2020.
We also anticipate that politicians and individuals alike who denied climate science right up until it smacked them in the head, will zero in on Big Carbon polluters. Rending of garments and anguished cries of, “They knew but they didn’t tell us!” might be heard in committee hearings and courtrooms everywhere.
The courts, too, will be busy assigning blame in their black-and-white fashion, and their decisions could have consequences far beyond any one decision. As we’ve seen above, insurers and investors are mighty touchy about backing or underwriting industries taking a pasting in the courts.
For those considering the current state of the U.S. judiciary, we suggest that such decisions are just as likely to happen outside the U.S. – and even from other jurisdictions, they can still affect multinational companies, including those based in the U.S.