An article with some layers...

Holy crap, talk about an article with some layers to it. I recently found a great article that goes into some depth (well, as much as a simple news article can) about the health of insurance agencies and how the impending climate change could throw off the entire insurance model.

The article focuses on how the beginning of climate change is already affecting the way insurance companies do business as well as how they are regulated. As the total numbers of environmental hazards is rising so are the amount of insurance dollars beings handed out to help cope with those problems. Insurance dollars don't come from thin air, they are forecasted far in the past and are estimated numbers so that companies can have enough when called upon. However, the new rash of disasters would completely throw that off.

The article states:
"“Insurance is the first line of defense against extreme weather losses, but climate change is a game-changer for the models that insurers have long relied on,” Washington State Insurance Commissioner Mike Kreidler told an industry blog on risk and insurance. “Companies will need to adapt if insurance is to remain available and affordable.”
“With 40 percent of industrial insurance claims that Allianz now pays out being due to natural catastrophes, climate change represents a threat to our business,” Allianz told the Insurance Journal."


This opens up a new layer of the 'health' of the insurance companies. Insurance companies could be reporting gains and investors buying stock in these companies, but what if a number of disaster occur to the point where the insurance company would go under. This in not an infrequent event, but what happens if it becomes more frequent in the future with the increase in natural disasters? 

The article calls insurance the "oxygen that the economy needs to breathe", now I dont know enough about the complicated inter workings of the economy as a whole, but that statement seems a bit over the top. I do think that it's important for insurance agencies to take into account the pending climate change and forecast similarly.

There are even relatively new regulations put into place to help account for that, "In New York, California and Washington State, regulators already require major insurance companies to disclose their exposure to climate-related risks. Our report calls for rolling this approach out nationwide. Expanding disclosure would prompt insurers to incorporate climate risk into their business decisions—something they must do if they are to thrive, and even to survive, the coming storms. Disclosure would also help investors and regulators more accurately assess insurance companies’ financial strength."

Overall this was a pretty cool article to find and I'm someone who finds economics and geography interesting so it was right up my alley.

http://www.forbes.com/sites/mindylubber/2012/10/11/climate-proofing-the-insurance-industry/