It’s no surprise that a UN think-tank issued yet another dire warning last week about accelerating global extinctions, groundwater depletion, melting mountain glaciers, space debris and unbearable heat.
But this report, released by the UN University’s Institute for Environment and Human Security, based in Germany, goes further than usual, identifying a sixth “risk tipping point” now looming large: an uninsurable future.
This is at the heart of how climate change is affecting the prosperous West. Until around 2020, people of richer countries including Australia were able to set aside ecological damage, accumulating waste, space junk, deadly heatwaves or depleted groundwater as fringe issues that only “greenies” worry about. Now, however, they face something all too close to home.
Not being able to afford to insure the family home and the accumulated wealth of a lifetime is exactly what we in the developed world must now expect, says the UNU report, as Earth’s surface temperature charges past the “safe” warming limit of 1.5C.
The Interconnected Disaster Risks report is based on past and current observations and experience, and this is never more so than in the case of insurance. Since the 1970s, damage resulting from extreme weather disasters has increased sevenfold (inflation adjusted). Last year’s total of US313 billion is set to double again by 2040.
Insurance premiums around the world have risen steeply since 2015. Late last year reinsurers – the companies that insure insurers – lifted the prices they charged the industry by as much as 40 per cent, causing some US companies to withdraw completely from regions of that country suffering repeated windstorm, fire or flood damage.
In Australia, in the wake of the Black Summer fires and recurring damage from coastal storms, rain events and floods in multiple river systems, the insurance industry predicts that over half a million homes will be uninsurable by 2030.
The Actuaries Institute has found that in the 2022-23 financial year the number of Australian households facing home insurance affordability stress was over one in nine. In that year the median home cover premium rose 28 per cent to $1894.
The institute’s website now features a national “climate index” – a series of annual snapshots of key elements of Australia’s climate since 1981. The index tracks changes in the frequency of extreme high and low temperatures, consecutive dry days, heavy rainfall, strong winds and sea level impacts, using data supplied by the Bureau of Meteorology and CSIRO.
In all of these categories, the maps change in colour from blue (comparatively benign) in earlier years to red (high incidence of extreme weather) in later years, especially over the past decade. The clear signal is a steadily worsening situation.
Six years ago the Paris-based insurance giant AXA warned that the whole world would soon be uninsurable if the level of warming projected by science – 4C by 2100 – came to pass. This year, when observed temperatures at Earth’s surface have pushed past expectations by a wide margin, those earlier projections look modest indeed.
We are used to seeing year-to-year temperature shifts of tiny fractions of a degree as Earth falls increasingly under the influence of greenhouse warming. But this year, ordinary mortals like me were astonished to see plots for the key indicators of surface temperature and sea ice cover move dramatically away from all past years – as they say, off the charts.
One of the people least astonished was veteran US climatologist James Hansen. Last week his email newsletter discussed a new paper he has co-authored, “Global warming in the pipeline”, to be released by Oxford University Press next week.
Hansen’s team uses a three-pronged approach to assessing current climate: global climate models, paleoclimate history and current observations. He thinks the Intergovernmental Panel on Climate Change (IPCC) relies too heavily on models, leading to dangerous advice to policymakers that targets for limiting global warming can still be achieved via realistic phasedown of emissions.
Hansen accused leading IPCC scientists of forcing him to withdraw a statement in an earlier paper that 2C of global warming would be “highly dangerous”. “Such is the nature of the scientific reticence that has infected our scientific community,” he commented.
Whatever the truth of this, those IPCC operatives, Hansen and all other climate scientists agree that the sum total of climate policies and practical responses is grossly inadequate, and that official emissions targets are increasingly disengaged from reality.
None of this is lost on insurance actuaries. So if your last home insurance bill was a nasty surprise, put your outrage aside. In the shifting sands of finance, there’s no more accurate measure of reality than insurance premiums.