Insurers face a crisis of confidence as global warming makes weather events unpredictable and increases damage according to one of the world's largest insurance broker Aon.
Aon president Eric Andersen said that climate change is destabilizing the insurance industry, driving up prices and pushing insurers out of high-risk markets. Mr. Andersen was testifying before the budget committee of the US Senate.
He said climate change is injecting uncertainty into an industry built on risk prediction and has created “a crisis of confidence around the ability to predict loss.”
Mr. Andersen said reinsurance companies, which help insurers pay catastrophic losses, “have been withdrawing from high-risk areas, around wildfire and flood in particular. Just as the US economy was overexposed to mortgage risk in 2008, the economy today is over exposed to climate risk.”
The senate budget committee’s hearing is aimed at drawing attention to climate risk and its potential threat to the federal budget.
The hearing covered familiar themes and it happened at an opportune moment. Major hurricanes and wildfires have driven insurance markets into crisis in Florida, Louisiana, California and are weakening insurers in other western states such as Colorado and Oregon.
Florida’s state-run property insurer warned recently that hurricane Ian had ‘significantly depleted’ its reserves and that it might impose a surcharge on millions of policyholders in the state if another major hurricane generates massive claims.
Mr. Andersen acknowledged it is a problem dealing with ‘weather anomalies’ caused by climate change that make storms and other events harder to predict.
He said, “The models of old that have been used looking backwards are not as valuable to the models that need to be developed for a changing climate.”