Climate Change and Global Warming Insurance
Written by Marlo .
Climate change and global warming. Topics that can ignite debate among educated scientists as well as politicians and those who elect them. Stephen Schnieder, a climate scientist, writing for The Huffington Post, summarized the global warming debate quite well:
“The past 40 years, when attached at the end of a reconstruction of the temperatures of the past 1000 years, look like a bit like a “hockey stick” with a wavy handle but a “blade” that rises above the climatic history of the millennium and exhibits the warmest decades in the record in the past 30 or so years. This reconstruction has been the object of intense arguments between the climatologists who constructed the hockey stick and some skeptical attackers who claimed it was erroneous.”
What do we do when we have a remote risk with catastrophic consequences if the risk occurs? Sure, your restaurant is unlikely to catch fire and burn to the ground; but, if it does? Smart business people insure against the risk.
With world leaders arriving in Copenhagen this week to discuss climate change, I found myself thinking about climate change the same way I view any business risk: can steps be taken to reduce the risk and, if the worst happens, can the business recover?
Fareed Zakaria, writer and political analyst for CNN, proposed similar thoughts in a recent commentary. Mr. Zakaria points out that an estimated 5% of global GDP was used to address the world “financial crisis,” why not use a percentage of world GDP as an insurance “premium” against future climate catastrophe? He points out that most of the investment of the “premiums” would go into areas that would benefit the economy and reduce dependence on unsustainable energy.
Climate change debate today is much like the consumer-product safety debate over the past fifty years. The Insurance Institute for Highway Safety is fifty years old this year. Insurers took up auto safety in an organized fashion to reduce risk. By reducing risk across an industry, insurers saved lives and reduced claims–in short, they saved money. Today insurers are realizing that prevention, education, and enforcement of green initiatives is a way to reduce the catastrophic risk–and associated potential claims–of global climate change.
Ultimately, it may be the global marketplace, led by insurers, that accomplishes sustainable and realistic goals in this environmental debate before the world leaders and scientists in Copenhagen can come to any consensus on what those goals would be.
Climate Change and Global Warming Insurance originally appeared on About.com Business Insurance on Monday, December 14th, 2009 at 09:30:53.