Insurance companies facilitate climate change by financing fossil fuels — and then try to raise rates because of the damage it causes.
Published in October 7, 2024
By Lindsay Fenlocksenior researcher at the Center for International Environmental Law, Charles Sliderssenior lawyer in the financial strategies department at the Center for International Environmental Law and Nikki ReischDirector of the Climate and Energy Program at the Center for International Environmental Law.
This is the fourth in a multi-part series examining the intersection of the climate crisis and the insurance crisis.
Last week, Hurricane Helene decimated much of the southeastern United States, causing widespread destruction and claiming more than one life 230 people in six states after it made landfall in Florida. North Carolina bore the brunt of storm damage exacerbated by climate change.
North Carolina homeowners face a rebuilding future while also staring down the barrel of an insurance crisis. Hurricane Helene exposed not only communities’ vulnerability to extreme weather, but also the flaws in the U.S. insurance system.
The Flood: Another climate-driven disaster
Catastrophic flooding devastated western parts of North Carolina, destroying essential infrastructure and leaving behind tens of thousands residents without electricity and running water more than a week after the storm.
This deluge is undoubtedly the result of climate change: global warming makes hurricanes possible retain more water vaporcausing more intense rainfall. Hurricane Helene blew some away 20 trillion gallons waters in Georgia, Tennessee, the Carolinas and Florida – 50 percent more rainfall according to experts, than would be the case without climate change.
Hurricane Helene proved this no part of the United States is safe from the climate crisis. Asheville, North Carolina was once seen as climatic paradise — safe from the increasingly frequent and severe extreme weather events caused by global warming. Now the idyllic town is flooded cloudy brown flood waterand a water supply network used by over 150,000 people seriously damaged.
As floodwaters begin to recede, the staggering costs of rebuilding homes and communities begin to come to light. North Carolina homeowners could face even greater financial hardship if the state allows insurance companies to raise rates again.
America’s insurance system failing homeowners in the face of the climate crisis
As if the devastation caused by Helene wasn’t enough, North Carolina homeowners are facing the threat of skyrocketing insurance premiums. On October 7, just over a week after the storm, state Insurance Commissioner Mike Causey began listening to arguments and evidence in the proposed one Home insurance rates increase by 42 percent, with increases of up to 99 percent in coastal areas percent if increases requested by the North Carolina Rate Bureau (NCRB) are approved.
Insurers say rising costs are forcing massive increases in premiums. But in North Carolina, insurance has proven to be profitable every year for the last decade, except 2018. Current Insurance Commissioner over the last eight years, it has raised property insurance rates 16 times.
Many homeowners and renters in North Carolina simply cannot afford the exorbitant premium payments. However, even those who purchase property insurance may not be able to benefit from private insurance in the event of a natural disaster.
Despite the belief that they have comprehensive insurance – z policies sold under names such as “all perils.”” — Many North Carolina home owners and renters affected by Hurricane Helene will not receive insurance payouts. Catastrophe risk modeling company Karen Clark & Company (KCC) confirmed that insured losses in Helene will be lower than expected because most damaged properties are not insured against flooding. According to the study, only 1 in 200 homes in western North Carolina, the area hardest hit by Hurricane Helene, have flood insurance. Reuters analysis federal flood insurance and census data compiled by the University of Minnesota. The average homeowners insurance policy covers wind damage but not flood damage.
Increasingly, whether people who suffer losses from climate storms get a penny from insurers depends not on whether their homes were damaged, but how. The damage was caused by Hurricane Ian, with record wind speeds $63 billion in private insurance claims. By contrast, Hurricane Florence in 2018 caused primarily water rather than wind damage, leaving uninsured flood losses estimated at nearly $20 billion and allowing private insurers largely avoid responsibility.
Flood risk is typically left to the National Flood Insurance Program (NFIP). However, despite climate change causing heavier and more intense rainfall inland, the Federal Emergency Management Agency’s (FEMA) flood risk maps are limited to seaside or riverside areas and do not include rain-induced flooding such as that caused by Hurricane Helene.
Hypocrisy of the insurance industry
North Carolina’s proposed rate increases highlight a broader problem: the insurance industry’s role in exacerbating the climate crisis and profiting from the industry that fuels it, while shifting the burden of climate consequences onto policyholders. Insurance companies say they must raise premiums to deal with the rising costs of extreme weather events, threatening to pull out of the home insurance market in areas prone to climate hazards, as many in California, Florida and Louisiana have already done.
But while insurers work to reduce their own risk from climate-induced weather events by raising premiums, reducing coverage or withdrawing from sensitive areas, they continue to facilitate the worsening climate crisis – and profit from the industries driving it – by investing in and underwriting fuels. fossil.
Fossil fuels are the main source of greenhouse gases (GHG) driving climate change. Production and combustion fossil fuels increased the concentration of greenhouse gases in the atmosphere to the highest level in at least 800,000 years. These greenhouse gases have caused global warming, increasing the global average temperature in 2023 up to 1.45°C (± 0.12°C) above the pre-industrial averageand the year 2023 was the warmest year on record.
Nevertheless, US insurance companies have investments worth over 500 billion dollars in fossil fuel assets, including coal, oil and gas. Around the world, insurers got their share $21 billion from premiums for underwriting fossil fuel projects in 2022, which will enable these projects to continue.
Time for responsibility
When assessing the NCRB’s request for a rate increase, Commissioner Causey should assess the insurance industry’s contribution to the climate crisis. No rate increases should be granted to insurance companies that actively increase the risk to their policyholders by continuing to invest in and underwrite climate change-causing fossil fuel activities. Any concessions to the insurance industry should be conditional, at a minimum, on insurers limiting investment and coverage of the fossil fuel industry.
Hurricane Helene is a stark reminder of the staggering toll of the climate crisis. Homeowners should not be forced to bear the burden of both the physical damage and financial impacts of climate change. Insurers must stop profiting from the climate crisis they are fueling and start contributing to the solutions needed to mitigate future disasters.
The best protection against future climate-driven disasters is not comprehensive insurance policies, but ambitious climate action that rapidly and equitably phases out fossil fuels and supports communities’ resilience to adapt to a changing climate.
Other analysis pieces in this series include:
#imperfect #storm #Hurricane #Helene #exposes #insurers #climate #hypocrisy #Center #International #Environmental #Law