I fully agree with the idea that insurance is at the leading edge of climate risk, either withdrawing from insuring assets and activities because the risks become too high, or taking huge losses from failing to calculate risk appropriately. Yet without insurance there is no global economy. This really hasn't widely sunk in.
Speaking of sinking, largely unconsidered at the moment is the $13 trillion of annual trade that travels over the ocean. Ocean conditions, currents, weather, algae fowling, biosecurity and invasive species transfer, and many other situations are changing rapidly creating a highly dynamic risk environment. If risk modelling doesn't take into account these changes, and in a real-time manner, we could see massive and existential losses across the maritime sector.
Thank you for pointing out the increased risk to human (insured) activities resulting from changes in ocean conditions and other changes such as assaults by invasive species. Due to the lack of education in the art/science of Systems Thinking in the population at large, I doubt that the public has any awareness of this risk at all. I wonder to what extent the insurance industry's top analysts use Systems Thinking?
I think we can see from reports such as those authored by Sandy, the top analysts are thinking and discussing, but there doesn't appear to be widespread changes in underwriting modelling and risk pricing beyond accounting for increasing historical claims. I believe this is why the reports continue to be written.
I think there is an opportunity to build improved mainstream risk models and products that more transparently account for the rapid and ongoing changes. I'm certainly not saying nothing is happening, there are some good innovations such as parametric insurance for coastal ecosystems.
Perhaps when I said largely unconsidered, I should have said largely not present in the visible discourse.
Thank you for this very insightful essay, John. The insurance industry has largely gotten out of the home owner insurance business in California (as best as I understand things). My sister lives in California, north of Sacramento in forrest fire prone territory. She lost her private insurance and had to apply for insurance from the state government. When the government becomes the insurer of last resort, what does that do to our world? Will private insurance companies go out of business some day... replaced completely by government insurance? Is "insurance" really supposed to be one of the "jobs" we want our governments to do? Might be a good idea, actually... since the government is not in the business of making a profit. Hmmm...
I fully agree with the idea that insurance is at the leading edge of climate risk, either withdrawing from insuring assets and activities because the risks become too high, or taking huge losses from failing to calculate risk appropriately. Yet without insurance there is no global economy. This really hasn't widely sunk in.
Speaking of sinking, largely unconsidered at the moment is the $13 trillion of annual trade that travels over the ocean. Ocean conditions, currents, weather, algae fowling, biosecurity and invasive species transfer, and many other situations are changing rapidly creating a highly dynamic risk environment. If risk modelling doesn't take into account these changes, and in a real-time manner, we could see massive and existential losses across the maritime sector.
Thank you for pointing out the increased risk to human (insured) activities resulting from changes in ocean conditions and other changes such as assaults by invasive species. Due to the lack of education in the art/science of Systems Thinking in the population at large, I doubt that the public has any awareness of this risk at all. I wonder to what extent the insurance industry's top analysts use Systems Thinking?
I think we can see from reports such as those authored by Sandy, the top analysts are thinking and discussing, but there doesn't appear to be widespread changes in underwriting modelling and risk pricing beyond accounting for increasing historical claims. I believe this is why the reports continue to be written.
I think there is an opportunity to build improved mainstream risk models and products that more transparently account for the rapid and ongoing changes. I'm certainly not saying nothing is happening, there are some good innovations such as parametric insurance for coastal ecosystems.
Perhaps when I said largely unconsidered, I should have said largely not present in the visible discourse.
Thank you for this very insightful essay, John. The insurance industry has largely gotten out of the home owner insurance business in California (as best as I understand things). My sister lives in California, north of Sacramento in forrest fire prone territory. She lost her private insurance and had to apply for insurance from the state government. When the government becomes the insurer of last resort, what does that do to our world? Will private insurance companies go out of business some day... replaced completely by government insurance? Is "insurance" really supposed to be one of the "jobs" we want our governments to do? Might be a good idea, actually... since the government is not in the business of making a profit. Hmmm...