Time for real culprits to bear costs of climate change as insurance becomes “unsustainable”

Time for real culprits to bear costs of climate change as insurance becomes “unsustainable” | Insurance Business New Zealand

Environmental

Time for real culprits to bear costs of climate change as insurance becomes “unsustainable”

Campaigner hits out as firms grapple with financial impact

Environmental

By
Terry Gangcuangco

Extreme weather events are creating escalating costs worldwide, with insurance companies and governments struggling to manage the financial impact, so a campaigner is arguing it’s time the real culprits paid up.

According to Ian Duff, head of Greenpeace International’s Stop Drilling Start Paying campaign, the growing frequency and intensity of such events – driven by climate change – are rendering traditional insurance models increasingly unsustainable.

In fact, a World Economic Forum analysis warns that by 2050, climate change could cause an additional US$12.5 trillion in global economic losses.

In an opinion piece published by Context, Duff asked: “A key question is: who pays for all of this?” Historically, the insurance sector provided the answer by allowing societies to transfer and distribute the risks of such disasters. However, the surge in violent weather events has made it much more challenging for insurers to maintain this role.

Duff pointed out that in France, insurance premiums are rising to unsustainable levels, prompting state intervention. In Germany, only half of residential buildings are adequately insured, with regions like Bavaria facing even grimmer statistics.

Insurance costs for Texas homeowners are also expected to rise as a consequence of Hurricane Beryl, while certain properties in areas of California, Florida, and Louisiana have become entirely uninsurable due to the growing risks of wildfires and hurricanes.

The trend is even more pronounced in Global South countries, where access to insurance is already limited. Duff highlighted the growing insurance gap as a critical issue, with the industry, regulators, and international bodies like the United Nations grappling with how to address it.

“The model of insurance is faltering,” Duff stated, adding that alternative approaches must prioritise resilience and affordability over profits. He believes one potential solution is to hold those responsible for climate change accountable for the costs.

“Without human-induced climate change, extreme weather events would be far less frequent and less intense,” Duff asserted, pointing directly at the fossil fuel industry as a major culprit.

He lamented that oil and gas companies, some of the world’s largest polluters, have long known about the impacts of climate change but have continued to extract fossil fuels, obstruct climate action, and profit from the resulting devastation.

Duff is advocating for insurers to shift their strategy by holding oil and gas companies liable for the losses incurred, similar to the way the insurance industry previously took action against tobacco companies for deceptive practices.

Additionally, a recent study found that governments could raise US$900 billion by 2030 through taxing fossil fuel companies in the world’s wealthiest economies.

“Forcing oil and gas companies to pay for loss and damage would address the insurance gap both practically and fairly,” Duff argued. The approach would help maintain affordable insurance for all while ensuring that those who profit from pollution bear the costs.

Duff believes that holding the fossil fuel industry accountable could also make it a less attractive investment, thereby contributing to its managed decline.

What do you think about this story? Share your thoughts in the comments below.