Winds of Insurance Change

Tuesday, December 12, 2006

In the interesting and timely Dec. 2 Style article "A Dream Blown Away," on the insurance industry's reaction to climate change, Peg Buchanan was quoted as saying: "I feel sorry for Katrina victims. . . . But I don't see why the rest of the world should be punished because we like oceanfront."

She and the article ignored a fundamental component of the concept of insurance: shared risk.

Insurance is a pool of money from the many, presumed to be of low risk, to pay for major events (such as fires, natural disasters, health emergencies) affecting the few.

Some oceanfront homeowners are angry and incredulous that risk assessors, and the rest of us, aren't willing to subsidize million-dollar homes on barrier islands. Well, where do they think the money will come from when a storm similar to Hurricane Katrina destroys their homes?




The insurance industry has incorrectly scapegoated climate change as the driving force behind the strong hurricane cycle.

Average global temperatures have risen over the past 100 years, but there are no reliable data connecting higher temperatures to increased global or Atlantic hurricane frequency or intensity. We are in the midst of an active hurricane cycle that is expected to last the next decade or two. We will probably then enter a quieter period in the Atlantic basin, similar to the one we experienced from 1970 to 1994.

To illustrate the decadal cycles, in a quarter-century period from 1945 to 1969, when the globe was experiencing a weak cooling trend, there were 80 major (Category 3, 4 and 5) Atlantic basin hurricanes. In contrast, during a similar span from 1970 to 1994, a period of general global warming, there were only 38 major Atlantic basin hurricanes.

What made the 2004 and 2005 seasons so unusually destructive was not the frequency of major hurricanes but the high percentage of major hurricanes that steered over the U.S. coastline and the breaching of the New Orleans levees.

Insurers fear risk, and risk can be high during an active hurricane cycle. The climate is constantly changing, but the real culprit for severe hurricane damage in recent years has been the upper-air steering currents.


Fort Collins, Colo.

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