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The Changing Climate Is Changing Insurance

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As the climate changes, wildfires get bigger and more destructive and hurricanes and powerful storms are more frequent and damaging.  In places where these things are occurring, it is getting harder and more expensive for many homeowners to get insurance.  The affordability of home insurance in the face of climate change has become a huge issue in many states.

In California, the number of homeowners who got non-renewal notices from their insurance companies rose by 6% between 2017 and 2018.  In areas directly affected by wildfires between 2015 and 2017, that number jumped by 10%. Similar things have happened in Florida, Louisiana, Mississippi, and Texas, where hurricanes and flooding have caused extensive damage.  Because of this, many homeowners have been forced to turn to bare-bone plans such as the California Fair Access to Insurance Plan, which can cost two or three times as much as normal insurance policies.

According to a 2019 survey of insurance companies, more than half of insurance regulators said that climate change was likely to have a high impact or an extremely high impact on the availability of insurance coverage and the assumptions used for underwriting.  In the past, governments have been able to mandate coverage in certain areas or even provide coverage themselves in some cases.  As the occurrence of climate-related damage becomes increasingly frequent, homeowners have to face up to a grim reality.

The challenges of dealing with wildfires, floods, powerful storms, and the like are significant enough for people who live in high-risk areas.  Increasingly, home insurance in these places is becoming much more expensive, harder to find, and is worth less.

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As Climate Impacts Worsen, Homeowners Struggle to Find Affordable Insurance

Photo, posted September 1, 2020, courtesy of The National Guard via Flickr.

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Climate Change And The Bottom Line

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Large companies around the world are facing up to the fact that climate change could substantially affect their bottom lines within the next five years.  Shareholders and regulators have been applying pressure to companies to disclose the specific financial impacts they could face as the planet warms and companies are increasingly making those disclosures.

A non-profit charity called CDP (formerly known as the Carbon Disclosure Project) runs the global disclosure system for investors, companies, cities, states, and regions to manage their environmental impacts.  In 2018, more than 7,000 companies submitted reports to CDP and, for the first time, CDP explicitly asked firms to try to calculate how a warming planet might affect them financially.

Analysis of the reports from 215 of the world’s 500 largest corporations revealed that these companies alone potentially faced roughly $1 trillion in costs related to climate change in the decades ahead unless they took proactive steps to prepare. 

Climate-related risks range from extreme weather that could disrupt supply chains to stricter climate regulations that could hurt the value of coal, oil, and gas investments.  Technology companies like Google’s parent company, Alphabet, Inc., face increased costs to cool energy-hungry data centers as temperatures rise.

In all, the world’s largest companies estimated that at least $250 billion of assets may need to be written off or retired early as the planet heats up.  Previous studies, based on computer climate modeling, have estimated that the risks of global warming, if left unmanaged, could cost the world’s financial sector between $1.7 trillion to $24.2 trillion in net present value terms.

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Companies See Climate Change Hitting Their Bottom Lines in the Next 5 Years

Photo, posted February 29, 2016, courtesy of Ben Nuttall via Flickr.

Earth Wise is a production of WAMC Northeast Public Radio.

Coal Isn’t Even Cheap Anymore

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Coal has historically been very cheap compared with many other energy sources and the reason is that it is so plentiful.  The United States has especially abundant quantities of the stuff – perhaps a quarter of the world’s estimated recoverable reserves.  Estimates are that at the rate at which we are currently using coal here, the remaining reserves would last about 325 years. 

That would be great, of course, if the use of coal was not relentlessly destructive to the environment, hazardous to human health, and a major driver for global warming.  Despite all of that, the Trump administration is a big booster of coal.

But coal has little chance of holding on to its current status, much less having some kind of renaissance.  According to a new report from renewables analysis firm Energy Innovation, nearly 75% of coal-fired power plants in the United States generate electricity that is more expensive than local wind and solar resources.   Wind power, in particular, can at times provide electricity at half the cost of coal.

Wind and solar power are growing by leaps and bounds.  The Guardian reported that by 2025, enough wind and solar power will be generated at low enough prices in the U.S. that it could replace 86% of the entire U.S. coal fleet with lower-cost electricity.

It has been known for some time that there are places where the so-called coal crossover has already taken place.   But this is actually far more widespread than previously thought.  Substantial coal capacity is currently at risk in North Carolina, Florida, Georgia and Texas.  By 2025, Indiana, Michigan, Ohio, and Wisconsin will join their ranks.

The biggest threat to coal is not regulators or environmentalists; it is economics.

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Renewables Cheaper Than 75 Percent of U.S. Coal Fleet, Report Finds

Photo, posted May 1, 2011, courtesy of Alan Stark via Flickr.

Earth Wise is a production of WAMC Northeast Public Radio.

WAMC Northeast Public Radio

WAMC/Northeast Public Radio is a regional public radio network serving parts of seven northeastern states (more...)