In a recent blog post (“Risk Management, Insurance and the Climate Crisis“), I reported that insurance regulators had found that the vast majority of US insurers were under-prepared for climate change.
In presentation slides contained within that post, I quoted the chair of major Australian insurer QBE, Belinda Hutchinson, who asserted in 2011 that climate change had nothing to do with the recent string of natural disasters that had cost insurance companies more than $3.6 billion. She said:
“The catastrophe events that have taken place this year, the floods in Queensland, the fires, have nothing to do with climate change. They are part of Australia’s really long history of floods, fires, droughts.”
I challenged that assertion with material provided by Australia’s former Climate Commission and others.
The Climate Commission was disbanded by the recently-elected Liberal/National Party coalition government led by Tony Abbott. The Commission, led by former Australian of the Year, Professor Tim Flannery, has re-formed as the independently-funded Climate Council.
Two articles in today’s Age newspaper are very relevant to these issues:
QBE takes $4b hit on profit downgrade, chair’s exit (Extracts from The Age, 9th December, 2013 with my underline):
“QBE shareholders have taken a $4 billion hit this morning after the company announced a major profit downgrade and Belinda Hutchinson signalled her retirement from the insurance behemoth.”
“QBE’s US division has been pummelled by problems in its crop, lenders placed property insurance and program businesses. The crop arm has been hit by the worst drought in over 50 years . . .”
“QBE announced this morning it would suffer an expected $US250 million . . . net loss for the year to December, as profit hits from its beleaguered US division festered. Shares tumbled this morning, . . . falling 19.4 per cent, . . . wiping between $3.5 billion and $4 billion from the insurer’s market capitalisation.
Reality bites as climate change adds fuels to bushfires (The Age, 9th December, 2013):
This article was written by Professor Flannery on the day the Climate Commission released a report on the growing frequency and intensity of bushfires in Australia.
Professor Flannery wrote:
“So, while bushfires are part of the Australian story, more intense and frequent bushfires are part of the Australian climate change story. The current environment in which we experience bushfires is changing. The lengthened bushfire season, and increased frequency and intensity of heatwaves, mean that the overall risk of bushfires in Australia has amplified. Bushfires in Australia are now occurring in a new, more dangerous environment. It is this new environment of increased bushfire risk that will affect Australia, and Australians, significantly.”
I argue that those involved in risk management and insurance need to consider the non-linear nature of:
(a) trends in the frequency and intensity of extreme events; and
(b) the destructive capacity of those events.
Due to this non-linearity, past history of events is not necessarily a reliable guide to current and future impacts.
We must also consider the conservative nature of many official climate change projections, along with credible alternative findings.
Flannery, Tim, “Reality bites as climate change adds fuels to bushfires“, The Age, 9th December, 2013, http://www.theage.com.au/comment/reality-bites-as-climate-change-adds-fuels-to-bushfires-20131208-2yz47.html
Liew, Ruth, “QBE takes $4b hit on profit downgrade, chair’s exit“, The Age, 9th December, 2013, http://www.theage.com.au/business/banking-and-finance/qbe-takes-4b-hit-on-profit-downgrade-chairs-exit-20131209-2yzyi.html