SELECT COMMITTEE: EXTREME WEATHER EVENTS FROM GLOBAL WARMING COULD TURN INTO FISCAL DISASTER FOR AMERICA

Washington, DC – The steep economic costs of inaction to stop global warming’s extreme weather impacts were highlighted today at a hearing before the Select Committee on Energy Independence and Global Warming. Featuring experts from the insurance industry, Chairman Edward Markey (D-MA) convened the hearing to address the unnecessary risks and costs to America’s economy if we do not set limits and reduce heat-trapping global warming pollution.

Rep. Markey, the Chairman of the Select Committee, noted that total losses from weather-related events over the past 25 years have topped half a trillion dollars, and that a recent General Accounting Office (GAO) report warns of significant additional costs from a hotter world with a more unstable climate. This could spell economic doom for the insurance industry, which comprises approximately 10 percent of the United States economy.

“Scientists have made it clear that global warming causes more severe weather events like Katrina and the recent damaging Nor’easter, and a hotter world will only precipitate more of these events,” said Rep. Markey. “Along with lives lost, and homes and businesses ruined, the sheer economic costs of more than half a trillion dollars over the past 25 years is staggering. We need to enact real solutions cutting global warming pollution to protect our economy and American families bearing the brunt of these costs.”

The GAO report notes that insurers paid more than $320 billion in claims on weather-related losses from 1980 to 2005. However, this figure only accounts for 40 percent of total losses, as the lion’s share of weather-related damage is uninsured and borne by American families and businesses. The total estimated damage over this period is as high as $800 billion.

The experts testifying before the hearing were Mike Kreidler, Washington State Insurance Commissioner; Frank Nutter, President, Reinsurance Association of America; and John B. Stephenson, Director of Natural Resources and Environment at GAO.

Staying Stable, Getting Risky

Insurance functions best when risk can be spread out over time, geographical areas, and other factors. Insurance companies weigh the potential for risk versus the ability to manage capital to be able to pay any claims and earn profits. If the risks outweigh the potential to manage capital to pay claims, the insurers will refuse coverage. They also purchase reinsurance to cover portions of their financial risk.

At the Select Committee hearing, the experts noted that to remain financially stable, the insurance industry must be able to estimate and prepare for the potential impact of future weather-related events, and that global warming could lead to increased and unpredictable severe weather, throwing their business model into turmoil.

“If there were no financial impacts or risks from global warming, we wouldn’t be hearing from the very people who make their living assessing these risks and costs,” said Rep. Markey.

Climate Science Points to More Severe Weather

According to the most recent report from the Intergovernmental Panel on Climate Change (IPCC), there is observational evidence from around the world showing natural systems are being affected by regional climate changes. The observed and predicted weather-related impacts include more severe droughts, heat waves, and floods, as well as more intense storms and hurricanes. The increased prevalence of these types of catastrophic climate events in the future from global warming will bring an increased risk of economic loss. Since almost everything that is insured – from property to crops to human life and health – is susceptible to extreme weather events, the insurance industry is especially vulnerable to increased severity and frequency of catastrophic weather events. 

According to the GAO report, hurricanes are the most damaging weather events, accounting for 45 percent of all weather-related insured losses in the past 25 years. In testimony given last week before the Select Committee on dangerous global warming, Georgia Tech professor Dr. Judith Curry noted the potential increases in severe weather events. An expert on the link between global warming and the intensity of hurricanes, Dr. Curry predicted that with warmer oceans we would see hurricanes that are more severe. Studies done by Dr. Curry and Professor Kerry Emanuel of MIT show the intensity of hurricanes has increased by 50 percent over the past 35 years due to global warming.

Six of the ten most expensive catastrophes for United States property and casualty insurers were associated with hurricanes that happened in a fourteen-month span during 2004 and 2005. Currently, 50 percent of America’s population lives within 70 miles of a coast.

“Countless American homes and businesses in the crosshairs of global warming, and we’ve already seen what severe weather can do to proud cities like New Orleans,” said Rep. Markey. “When it comes to global warming, insurers see the risk. Scientists see the risk. And now Congress needs to see the risk and put real solutions in place to cut global warming pollution.”

To avoid the devastating effects of global warming U.S. global warming emissions must be cut by 80 percent by the middle of this century.

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