Climate Change: A Dollar and Sense Issue

Dec 05, 2013

Climate change may seem like a faroff threat to some, but its relentless assault is costing us dearly today. The insidious economic fallout from climate change takes many forms.

For example, Hurricane Sandy and the monster Typhoon Haiyan in the Philippines were 24/7 headline stories before fading away; for the victims and payers, it was just the beginning. Words cannot describe the personal tragedies of the victims. The key “payers” in Hurricane Sandy – the government, insurers, and reinsurance companies – bore the immediate economic brunt of this storm. Over time, that cost will be shifted to tax payers, purchasers of homeowners/business insurance, and others; the cost less transparent because of this costshifting mechanism.

Caseinpoint: Few of us lose sleep over the losses of reinsurance companies – those providing catastrophic coverage for primary insurers – but their capacity to insure such risks is finite. To mitigate losses, they must a) raise their rates, b) cancel policies, or c) reduce coverage in high risk areas such as coastal water areas subject to storm surges. If you are one of the 123 million Americans – about 39% of our population – living in coastal areas, you may already be feeling the pinch. For many, homeowner premiums have skyrocketed; for others, coverage can only be found through state risk pools – the socalled “insurer of last resort” and a costly alternative that seldom covers 100% of the risk.

Nor is there a free ride for those living in the interior. Their new “norm” seems to be that of monster tornados, “onceinahundredyear” floods that now occur regularly, catastrophic wild fires, or devastating droughts that have stunted agricultural production and caused food prices to rise. Parenthetically, the number of natural catastrophes in North America has increased fivefold since 1990.

The common denominator here is climate change. It creates the conditions for megaweather events to occur and greatly influences the frequency and severity of the catastrophic storms we now see. For those with “skininthegame” like the government, military and intelligence agencies, reinsurers and 97% of the climate science community, climate change is not a distant threat; it’s a realtime “threat multiplier.”

Skeptics may look upon climate activists as being more interested in saving polar bears than saving money, but the fact remains – regardless of rationale – that climate change has become a costly proposition. The costs come back to us in many ways such as:

1. Catastrophic storm damage, floods, droughts, wild fires and loss of life

2. Rising premiums on homeowners insurance to cover the risk exposure

3. Loss of coverage and/or the need to purchase insurance through costly staterisk pools

4. Rising food prices attributable to droughts and failing crops

5. Tax dollars redirected toward natural disaster relief efforts and rebuilding

6. Geopolitical threats with climate change a “threatmultiplier” intensifying global risks

Climate change is a dollar and “sense” threat costing us big bucks today, and it makes infinitely good sense to develop effective mitigation and adaptation strategies to cushion the blows – if not for the polar bears, for ourselves. For more information on things we can do, please download my free “Weathering the Storm Guide.”

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