Plenty of companies are angling to make money off climate change
sometime in the future. The insurance industry isn’t waiting around for
the science or the politics to settle: It’s raising premiums now on the
premise that rising temperatures will lead to more hurricanes, more
damage, and more claims.
M.P. McQueen reports today in the WSJ
that insurers across the U.S. are increasingly relying on “computerized
catastrophe modeling” which tells them just what they want to hear:
Hurricanes will get bigger and more frequent in coming years, so
homeowners in coastal areas have to pony up even more to protect their
houses—even as insurers rack up record profits. The shift from using
historical data to computer models is to blame, the paper says:
Companies that rely too heavily on cat-model data “are
subjecting their businesses and their customers to the volatility of
computer models,” says [Karen] Clark, who now runs a Boston cat-model
consulting business. “The models are being used as if they produce
definitive answers rather than uncertain estimates.” Ms. Clark says she
advises clients to use them in conjunction with other factors, such as
broad historical data.
The insurance industry is dealing with the same gremlins that the
global climate-change industry has been grappling with for years:
Computer models aren’t oracles, though they are often treated as such.
Yale’s Environment 360 Magazine recently examined the state of play among climate modelers, with gloomy conclusions, especially for the short-term, local predictions used by the insurance industry:
Steve Rayner, director of the James Martin Institute,
says, “What climate models do well is give a broad picture. What they
are absolutely lousy at is giving specific forecasts for particular
places or times.” And yet that is what modelers are increasingly doing
[…] Concern is greatest about predicting climate in the tropics,
including hurricane formation.
The connection between global warming, rising temperatures, and
hurricanes is a stormy subject. The only hitch is that nobody—not even
the World Meterological Organization, one of the parents of the
Nobel-prize winning Intergovernmental Panel on Climate Change—can find that connection. And more recent research
hasn’t cleared the air any further—hurricanes were just as frequent in
the late 19th century; they were just as strong during World War II,
all before the recent rising temperatures kicked in.
