As seas continue to rise, the insurance industry will play a key role in how communities respond — rates may have as much to say about what gets built and where as government regulations and codes. Rates and incentives may also have a lot to say about practices that reduce businesses' carbon footprints, which many scientists believe is a cause of global warming.
U.S. insurers are beginning to respond to climate change as billion-dollar disasters have become more common. Insured losses in the U.S. in 2012 totaled $57.9 billion. The average between 2000 and 2001 was $27 billion.
"The weather is getting worse," says Tom Wilson, CEO and president of Allstate, at a conference for business writers, though he was careful to say he was "agnostic" about why. One recent study cited by the New Yorker says the weather is getting worse at a rate of 4.8% a year in terms of the frequency of billion-dollar disasters.
European-based reinsurance companies have shown more willingness to discuss and implement ways to respond to dangers posed by climate change. Giant reinsurance companies such as Munich Re and Swiss Re sponsor research that studies the impact of climate change and the cost of adapting to it. Some reinsurers are focused on how to help developing countries, which are seen as more vulnerable.
Still, Ceres, a non-profit group that promotes eco-friendly business practices, says only 23 out of 184 insurers have comprehensive strategies for dealing with climate change. Though most insurers don't push for reforms publicly, some are responding to the effects of climate change by reducing their risk, pulling out of areas within a certain distance of a coastline or issuing statewide new-policy moratoriums. Insurers also feel protected by the National Flood Insurance Program, which covers up to $250,000 from storm surge flooding. And the increasing bad weather doesn't seem to impact profits, with the Property Casualty Insurers Association of America reporting the industry was more profitable in 2012 than 2011.